Luxury Online

“Gucci is the only brand of Kering SA that is not selling on the platform yet, the company owns brands such as Alexander McQueen, Bottega Veneta, Stella McCartney and strangely Puma too, as well as Volcom and others. I am guessing that the reference to Amazon.com having the size and scale is something that Rupert sees as a threat to their collective businesses. He wants to maintain the quality, the reason why these companies do not cheapen their brands by mass producing affordable items, is to keep the allure.”


To market to market to buy a fat pig. Emerging market stocks as a collective have just recorded their longest losing streak in 24 years. This is in terms of days in a row sold off. 24 years is a long, long time ago. Nelson Mandela had only been released for a year from his 27 year jail sentence. Boris Yeltsin was elected as president of Russia back in 1991. The cold war ended that year, some can argue it has kind of restarted. Eden Hazard is at the top of the world, in terms of football, he was born in that year.

Apartheid ended that year, all the rules that kept ourselves from ourselves (incredibly dumb) were repealed. The Oceanos went down near Coffee Bay, remember that ship that sunk, the captain made sure he was off early? Nadine Gordimer won the Nobel prize for Literature. Paul’s favourite movie Terminator 2 was the highest grossing film in 1991. One of my favourites, the spoof movie Hot Shots was 9th. The top song on the charts globally that year was Everything I Do, I Do it For You by Canadian Bryan Adams. The S&P 500 ended the year close to 400 points. We have seen a fivefold increase in the index in 24 years, with many trials and tribulations along the way. Google, Yahoo, Facebook, Amazon.com, all those businesses did not exist. Mark Zuckerberg was 7 years old.

That is some context to when last emerging markets had such a long losing streak, in terms of number of days of selling in a row. Percentage wise it is hardly huge, we are down around 8 percent since the recent highs. Not quite what is referred to by the chartists as a “correction”. There are all sorts of words for short down and up periods, the Dow Jones is up over 2000 percent in 40 years, what do you call that? A lot, or just average and expected? The NASDAQ over the same time period is up 5900 percent, technology has certainly crushed it over that time, obviously all the innovations for businesses has been very profitable for the companies and by extension their shareholders.

Investing is not for the fainthearted. It is hard and requires traits that many do not want to think about, which is why forced savings in terms of retirement savings, lock ups and restrictions on access to the capital is not necessarily a bad thing for the average salaried employee. I saw a 9Gag cartoon that had the caption “I will save more money for my future” at the top and “Hey look, shoes” at the bottom. Exactly. I see people finance expensive cars over four or five years at thousands of Rands a month to end up with an asset (tool) that is worth 30 percent of what they paid for it after five years, in nominal terms. God forbid they invest that same money in the market, you could lose it, apparently. As I said to my dad in the same conversation, you need consumers to help savers get rich. You cannot force people to save and delay gratification.


Company corner

Johann Rupert, chairman and controlling shareholder of Richemont, wants to team up with his rivals. What gives? And all this is not long after Richemont had injected their Net-a-Porter business in return for an equity stake in Yoox. They have equal equity for now, they do not have control of the business. The Bloomberg story is as follows: Richemont Invites LVMH to Join Website to Compete With Amazon. The plan is to actually use the Yoox Net-a-porter platform, by getting LVMH and Kering SA to have equity in the business, Yoox that is. Johann Rupert was talking at the FT Business of Luxury Summit in the picturesque town of Monaco.

Gucci is the only brand of Kering SA that is not selling on the platform yet, the company owns brands such as Alexander McQueen, Bottega Veneta, Stella McCartney and strangely Puma too, as well as Volcom and others. I am guessing that the reference to Amazon.com having the size and scale is something that Rupert sees as a threat to their collective businesses. He wants to maintain the quality, the reason why these companies do not cheapen their brands by mass producing affordable items, is to keep the allure.

I mean, if money was no object, would you object to a 4100 Dollar Babylone PM LVMH bag? It looks really nice as far as bags go, I have seen with my own eyes and heard how people will “sell their souls” for such items. If you are into shoes, then this one is for you guys, the Framework Richelieu, at a cool 1240 Dollars a pair. The Richemont brands are on the Net-a-porter website, you can get a Chloe Fedora leather shoulder bag for 2245 Dollars. Sorry, that one is actually sold out. Yes, sold out, meaning all of them have been bought.

The question is, would you buy a (the most expensive item) 70 thousand Dollar Olivia Collings 1840s silver, amethyst and diamond bracelet online? It is apparently one of a kind, with a certificate of authentication. I can see items that are not exactly out of reach of rich middle income people, more mainstream stuff being sold online. For your luxury item such as a Van Cleef & Arpels Palmyre necklace, 6 rows, described as “Six rows of round diamonds complement a graceful mounting in white gold for this elegant necklace” is marked on the online store at a cool 360 thousand Euros. That is a little over five million Rand. Is that with or without sales tax? Of course you would want to feel and try the item on before parting with that much money.

What this indicates to me, the move that Rupert is calling on his industry peers to sell on one platform (certified) is that he wants the exclusivity to remain exactly that. No cheapening of the brands, he knows the importance of that.


The Sasol chief David Constable will not be renewing his contract when it expires next year. He will be staying on as a consultant however, ironically closer to his family. The news filtered through two days ago. In an increasingly global world it is possible to commute and that is exactly what he has been doing. He is Canadian, turns (or turned) 54 this year, and has been at the company since his appointment in July of 2011. Prior to working at Sasol, Constable was at Fluor Corporation, the US engineering and construction company, that are specialists in the oil and gas industry, he is a civil engineer by trade.

I suspect what has happened here is that lifestyle choices for even high earners is becoming more important, in a world where people are richer than the prior generation. How much, i.e. what is the number, that one needs in order to retire at the same level? Well, in a local context, if you can generate 35 thousand Rand per 1 million Rand invested in the equities market, per annum, what would you need to live on? That is providing that you do not eat into the capital at all. In the context of a high powered earner (one must not always assume that they have great expenses) perhaps 55 is an age where they can retire and do what they want to do. I am not suggesting that being the CEO of Sasol is not what David Constable wanted to do, all I am saying is that it is hard to commute across the globe to family on a regular basis. The weigh up of lifestyle versus income, versus pressures of the job and being available all of the time takes its toll. You could argue that it is a good problem to have.

Either way, he has quit, and that is not good for shareholders and the business. I think that there is more than enough quality to appoint a local person for the job, hopefully an engineer with enough management experience. It is a very complex business, with complex plans to morph into a more competitive global chemicals business in North America, with an enormous glut of feedstock. That would be a good future for the business.


Fact of the day

The credit card as we know it, a certain size, 85.60 x 53.98 mm or 3 3⁄8 x 2 1⁄8 inches is not that old, historically speaking. Coincidentally that size is used for several things, business cards (yes, those still exist), ID documents (the SA ones are pretty cool) and many other cards that you have no space for in your wallet. Did the card size evolve relative to your pocket size, or wallet size? Surely an early wallet where you kept physical notes superseded a money sack or money bag.

Have you ever wondered why there are all those digits on the card? It is called the PAN, or the primary account number. They are mostly 16 digits long, Visa and MasterCard are the issuers that you know the best, the first issuer to have a general purpose credit card was Diners Club. Back to those embossed numbers. The validation of the card complies with the Luhn algorithm, which was patented by a chap by the name of Hans Peter Luhn, who worked for none other than IBM. The algorithm itself is over 60 years old, you can find the original patent here: Computer for verifying numbers. That allows you to switch, obviously it is a lot more complicated now than way back then.

All the banking systems are built to conform with the past norms and will evolve as such. Technology such as Apple Pay would eliminate the ability for anyone to “see” the card, plus it involves your thumbprint to authorise the transaction from the phone. I am pretty sure that people have invented ways to collect the data. We are evolving quickly away from “real money” to an electronic transfer society, in which there is always a trail of money, as you can imagine, this behaviour will be encouraged by the authorities, it leads to more tax compliance. Goodbye credit card as you know it, being a physical entity and hello electronic payment systems using thumbprints, rather than pin numbers.


Linkfest, lap it up

The drug that most of us can’t do without, coffee! Here is sciences approach to the optimal time to drink it – Why the worst time to drink coffee is actually in the morning.

Here is a new use for dronesDrones are the newest weapon in the fight against Chinese exam cheaters.

Given that I hopefully have many decades until I need sustained medical attention, seeing breakthroughs like this makes me smile just a little bit more about old age – Missing link found between brain, immune system; major disease implications. More humans on the planet, with access to better technology and more resources at their disposal are seeing medical breakthroughs happen at an increasing pace.

When looking back into history we don’t normally hear much about the African continent – Mansa Musa, one of the wealthiest people who ever lived – Jessica Smith.


Home again German yields have crested 1 percent for the first time since 22 September last year. We seem to be catching a bid, finally! Markets are three quarters of a percent higher, perhaps the rates going higher anxiety crowd have had their moment. For now.


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

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