Obama takes on the Bears

“Some of the recent data in the US, around housing and motor vehicles suggest multi year highs. So what if the Fed raises rates? It happens, it just has not happened for a long, long time now. You should not care about all of that, the Chinese market trades at a multiple that sounds like 50, it is however 15 as Byron pointed out on the box this morning. Is that wildly expensive? Bearing in mind that the economy (the economy is not the stock market!) grows quickly.”


To market to market to buy a fat pig. Yech, another score for the bears. Talking bears did you see that world class footage of the Russian president and prime minister working out at the summer retreat and then enjoying a grill off for brunch, all washed down with a cup of black tea, that is so macho. Well, the state broadcaster in that country and the president obviously wanted to show their manliness, if your idea of manliness is onscreen exercising, grilling meat and drinking tea. Perhaps ditch the last one in a South African context. Meanwhile in the US State bordering Russia, Alaska, which is a whole 5000 miles away (just over 8000 km), President Obama was about to be drilled hard by Bear Grylls. Yes, President Obama was being put to test by an ex Special Forces chap. One real bear, you pick the one you like.

Whilst equity markets were being mauled by the bears, around concerns from the land of the Panda bear (did you see the pups born a few weeks ago), you should not be concerned. Some of the recent data in the US, around housing and motor vehicles suggest multi year highs. So what if the Fed raises rates? It happens, it just has not happened for a long, long time now. You should not care about all of that, the Chinese market trades at a multiple that sounds like 50, it is however 15 as Byron pointed out on the box this morning. Is that wildly expensive? Bearing in mind that the economy (the economy is not the stock market!) grows quickly.

Whilst equity markets were thrashed yesterday, they are up sharply today. On a day by day blow, the volatility can be too much to stomach for ordinary retail investors. I have heard all the same noises now as in the past, stay in cash, liquidate and wait for lower and so on. Seen it all before. Timing the market is either a skill or luck, when a few rare close watchers have the two combined time after time, they tend to attract the limelight. BusinessInsider had an article that suggested that a hedge fund advised by Naseem Taleb made over 1 billion in profits last week. That is more than being the guy who called it, that is actually making real money out of the stock market swoon and subsequent recovery. I wonder if the same applied in the last few sessions?

The money that we are interested in making for clients is by holding long term investments, companies in transformative industries, companies that have great management teams that sell products that are not oversupplied and are in high demand. Easier said than done, you know the old adage, the rocks did not run out when the stone age ended.

Lastly, Michael shouted across the table this morning that US exports to China account for a whole one percent of their total GNP. If China “slows down” off an elevated level, then surely this is not the end of the world? Particularly bearing in mind that imports from China to the US (you have heard the theory that China is exporting deflation) are cheaper with the devaluation of the Yuan to the US Dollar. The US imports roughly 3 Dollars for every one Dollar that they export to China, cheaper goods from China sounds like a good idea for the US consumer, not so -> Trade in Goods with China. The last time that the two countries, China and the US had anything resembling balance was back in 1985. Since then, we have seen the Chinese economic miracle of our time.

The Chinese economy has increased more than 20 fold in twenty years. A speed bump now in an immature market, relatively speaking, is going to happen with loads of savers who have gotten rich in a short period of time. The Chinese equity markets, the capital markets, did not exist 30 years ago when the US balanced trade with them. Keep calm and carry on, the data points to a better US consumer, which is possibly more important than a Chinese slowdown, which equals cheaper manufactured goods for everyone around the world. Equally, lower energy prices means that global consumers have more money to spend on other services and products. That sounds good to me.


Company corner

I have been hearing a lot about Apple recently, for starters there are continuously rumours about a car. An Apple Car. Is a vehicle not a commodity? Sort of, I guess. And the newer news is about the iPhone 6s, that seem to be coming, announced in the next week, September the 9th. Here is the invitation: “Hey Siri, give us a hint.” I like the idea of Siri, being around to help you, perhaps the best use for Siri is in a motor vehicle, when you really have to focus your attention on the road.

The other watching point is the company refocus on the Apple TV product, perhaps a more expensive product rivalling the Xbox or latest PlayStation, perhaps having as many choices as Netflix, perhaps both. The suggestion is that the product will be expensive, double the existing Apple Tv. 199 Dollars, which seems expensive, unless of course Apple tell you that you must have it at all costs it really is a product of beauty. Rumour mongering on the company’s next product or a refresh is a global sport. Rather than be hyperactive about it, I am pretty sure that we can all wait until next Wednesday evening local time, not so?


Linkfest, lap it up

The advantage of lower oil prices is that people use more of it, which is a good thing from a consumer perspective. Also there will be those who don’t use more oil but will have a saving that they can then spend in other parts of the economy – Oil demand is surging

Credit can be a good thing or a very bad thing depending on what you use that borrowed money for (shoes is not a good thing). Studies have shown that the family unit does better when woman have control of the purse strings, in the developing world men tend to spend their money on beer where woman are thinking about the next generation. – Big increase in women using credit. The worrying stat in the article is that twice as many woman have store cards compared to men, the up side though is that more woman are buying houses. There is power in owning your own place and then owning an asset that will hopefully be growing.

Teaching old dogs new tricks is having a good effect on their cognitive abilities – Senior citizens’ use of computers and mobile phones might shave 10 years off their mental age. It is interesting but not surprising that global IQ’s have been on the rise, that bodes well for humanity going forward.


Home again, home again, jiggety-jog. The Aussie Dollar is at the lowest point to the US Dollar since 2009, this as growth slowed to a snails pace, 0.2 percent in the last quarter. Australia is looking to beat the 26 year growth streak put together by The Netherlands (’82 to 2008), they are close. Another poor quarter with their major trading partner could put some pressure on that, however the good news with the weaker Aussie is that they are attracting strong inflows as a result of cheaper wonderful property, from the same said Chinese markets. Aussie is close to the rest of Asia, that bodes well for the country. Depressed prices might be a bad outcome in the medium term, in the long run the country will continue to benefit. Good thing that they diversified their economy, good thing that the population is skilled and small, about that cricket teams performances lately …. Mind you, they are still the world champs at the sport. Sigh.


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

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