Leaning like Lehman

“When those with the pot of money, those who control the pursestrings, decide to push the big red buzzer and give you an X and send you into “South African stocks have no talent” oblivion, you know what happens next.”

To market to market to buy a fat pig. Everything changed. Or nothing changed, take your pick. Resource stocks were on fire globally, and being a sort of dominated by resources index, it had a marked impact. There were some massive moves from the diversified miners, those were driving the show. Anglo up 7.8 percent, BHP Billiton up 7, Sasol up five and one quarter of a percent.

I flagged something very interesting, a tweet and a link (which is better than a wing and a prayer) from Joe Weisenthal, aka @TheStalwart who said: “This is stunning. On Monday, Emerging Markets had outflows at the same pace as the week Lehman went down.” And the link to the story: Money Pours Out of Emerging Markets at Rate Unseen Since Lehman. You need an explanation as to why you woke up on Monday and saw the Rand, along with all the other emerging currencies of the world tanking (I think we nearly reached 14 to the Dollar) this is it.

When those with the pot of money, those who control the pursestrings, decide to push the big red buzzer and give you an X and send you into “South African stocks have no talent” oblivion, you know what happens next. My daughters love that show, Simon Cowell and Howard Stern (It is actually Mel B, Amanda Holden and Alesha Dixon) are now household names. The big four red X’s came up on our screens at the beginning of the week. Of course in China too, I have not really checked India, Indonesia and South Korea, nor Russia, perhaps we should use this as an opportunity to do so. On Monday the Korean Kospi traded at a year low. Russia is slightly different, the currency has been very weak lately, their stock market did not trade near any lows.

Spare a thought for the Indonesians, the Jakarta stock exchange traded at a year low on Monday (since then it has bounced back 10 percent!!!!), their currency rout continued through Monday. Not only was their stock market feeling like Rocky Balboa after 25 rounds with Drago (those are movies that only 10 year old boys like), their market in Dollar terms was plumbing new lows. The Dollar has gained 55 percent to the Indonesia Rupiah in five years, reaching another multi decade low Monday. Over ten years it is 35 percent, it doesn’t feel that bad. The Indian Rupee traded at its worst level ever to the US Dollar on Monday. Ever. As did the Rand. So, the point that I am trying to make is that emerging markets for the time being have been shunned by those with the money, and that ain’t us. Oh sorry, Monday was also the lowest point for Indian equities in a year.

All these countries are tarred with the same brush, you may think that the reason is the poor GDP number earlier in the week, ironically that was released on a day when equity markets were recovering. The Rand was unchanged. I suppose the number was old and not exactly a shocker. The Chinese stock exchange for the record is up 4.7 percent this morning, following a heroic rally into the close yesterday. The S&P 500 is up 114 points from the lows on Monday at the open.

The week at face value has been unspectacular, with the four days to present returning 0.85 percent. Yet we have seen crazy moves. If you had no signal and got back Thursday evening, having left on Sunday evening, you would be none the wiser. OK, you would have seen futures in the toilet Sunday night, perhaps a week. Last evenings close in the US was no different, the S&P 500 fell two percent between two and three pm in the trading session, and then gained all of that back in the last hour.

Last point, again I learnt that the only fear gauge that there really is, is VIX, the volatility index. At some point in the last month it has been trading at 12, on Monday it spiked to above 50 and now trades at 26. Volatility is code for “this thing goes up a lot when stocks go down”. The last time that the VIX got above 40 was when the Europeans were falling around in August and September of 2011. So forget gold, forget any other “safe have”, the only index that tells you when there is great stress is the VIX. Access to those is available only in the options market in the US. A wild week ends a little better than where it started, the sun keeps coming up, people still have breakfast, lunch and supper (and cheat in-between). We are going to be OK.

Company corner

Monsanto dropped their bid for Syngenta a couple of days ago. On Wednesday, they suspended trade for a little while and then announced that they would be dropping their 46 billion Dollar bid for the Swiss company. These are very important companies both for humanity and farmers, at the core we are all hard coded with producing (or catching) food, right? It would have been a merger of equals at some scale, they have identical market caps at the time of the announcement. Syngenta is now lower, obviously as the floor, the bid price, has been removed.

Monsanto, the stock of the company, has woefully underperformed the market, year to date the stock is down 17.6 percent. That is poor. It is certainly not everyones favourite company, my take on it is simple, until everyone goes to sleep with a full tummy each and every evening and until we have eradicated hunger (something their products try hard at), then the high and mighty approach is not something I am interested in hearing. Sorry, I have a very strong opinion on hunger. If you are really committed to wanting to maximise resource, eat less meat, if you have to eat it, less resource intensive meat. I can’t understand why people who love read meat do not eat more wild animals, we have many. Or eat less meat, utilise the existing resources better by eating none at all. Invest in companies that produce drought resistant and disease resistant crops with greater yields. Like Monsanto.

Linkfest, lap it up

The internet is levelling the playing field! This highlights why it is key that everyone has access to the internet, it is the best way to close the gap between haves and have nots – A Kenyan won the gold medal in javelin after learning how to throw on YouTube.

The poster child of why socialism doesn’t work, has new problems – Venezuela Is Adding More Zeroes to Its Currency to Deal With Hyperinflation. The dropping oil price is just making things worse and is potentially speeding up the economic collapse of the country.

It amazes me how creative scientists are in coming up with new ways to push humanity forward – Scientists say that DNA could store 60,000 times more information than a computer. Looking inside of ourselves for the answers.

Home again, home again, jiggety-jog. It is Friday, we can leave you on a fun note. You may not find your name on the selection for the World Cup in three weeks time when the team is announced a little later. I am pretty sure that you realised a long time ago that you were not good enough. However, and perhaps observe from a distance before you interject this weekend with your friends and family (although after this strategy they are likely to be ex-friends), ask all the amazing selector experts and coaching staff, who are not the staff, “what level of rugby did you engage in at school?” Sometimes there is none whatsoever. X or Y or Z is not “useless”, they get paid a lot of money to play their trade on the sports field, they did not just rock up and get chosen. I for one would love to put an ordinary person up against either a beefy back rower running at them, or a speedster and see how ridiculous it looks.

Download this form – > World Cup Outrage Timesaver, you may have seen it going around, stick it on your fridge as per the instructions. There is some “bad” language in there, I certainly didn’t make the masterpiece.

US stock futures are lower, we are likely to see the tail end of the US rally. The Chinese market for what it is worth was up over four and a half percent. The Japanese markets were up strongly. Notwithstanding two days of that sort of movement, Chinese shares are down 8 percent over the last week, flat YTD. Stocks are up to start with.

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

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