Summer, RWC and Earnings Season

“Talking results, we are about to enter the heart of Q3 earnings season. Intel, Johnson & Johnson and JP Morgan Chase on Tuesday. Bank of America, Netflix on Wednesday, Citi and Goldman on Thursday, and then a very big one, General Electric next Friday. IBM and Morgan Stanley the following Monday, Boeing and Coke on the Wednesday, Amazon and Stryker on the Thursday, Apple in three Tuesdays time. It is going to be a huge three weeks for earnings and the Boks too!”


To market to market to buy a fat pig. Never have the release of minutes been as important since the last release of the minutes. Split this, hold that, stand off here and so on, there is so much dissecting of “everything Fed” that it gets to the point that Zoology students should change their tack to get more into the guts. I counted 72 people attending the joint meeting of the Federal Open Market Committee and the Board of Governors, as per the Minutes of the Federal Open Market Committee, September 16-17, 2015. Some only on the Wednesday afternoon however.

That is an enormous amount of smart people in one gathering. As impressive a gathering is currently happening in Lima, Peru, where all the central bankers and finance ministers of the world are attending an IMF shindig. This is the 32nd meeting. There is so much to read that you no doubt will have gathered enough information for the year, from Wolfgang Schauble (the German Finance minister) to IMF research on How Fiscal Policy Can Tame the Commodities Roller Coaster. It is all there to read.

We digress, as usual, alas. Back to the Fed and their ability to move capital markets. The minutes of the last meeting revelled that whilst global uncertainty, the Chinese economy slowing and stock markets taking a beating were reason for concern, they were unlikely to have a long lasting impact on the broader economy. In the short term however it meant that the September rate hike could be skipped, yet the Fed would still be on track to raise rates this year. In short the message from the Fed is “let’s watch it”. We used to have a client who was like that, you would have a lengthy conversation, be so very close to making the suggested adjustments, only for them to say: “let’s watch it. The Fed is in the lighthouse, watching and waiting, biding their time and they will raise rates when they see fit.

Earlier in the session the weekly jobless claims were a positive surprise, most especially after the last set of data from the US labor department looked average. As Mark J. Perry points out in his Thursday evening links on his Carpe Diem blog: As a share of the US labor force, jobless claims in September (at 0.174%) were the lowest since 1967 when the government started tracking weekly jobless claims. Something to keep in mind when you hear how bad/weak the US labor market is … Is it fair then to say that the most unnoticed number of the day (perhaps not really), as a result of all the fixation on the Fed minutes. If by his calculation that this is the strongest labour read since the numbers started being measured, then quite clearly this is excellent news. And the Fed should start raising rates as soon as possible, not so? DKDC, in this case is don’t know, DO care.

The upshot of it all was that equity markets roared ahead, the Dow Jones crossed 17 thousand again, the S&P 500 crossed through 2000, both indices up over four-fifths of a percent, the nerds of NASDAQ added half of that. Across to markets in the East this morning, they are all higher. Back home in Jozi, Jozi, stocks as a collective ended the day at the best point, up nearly one-third of a percent. It was a mixed bag, in fact for every share up in the Top 40, there was an equal number of shares lower. Glencore was rubbished, the banks saw some heavy handed selling, perhaps the fact that the Reserve Bank governor indicated (methinks over in Peru) that rates would possibly stay lower for longer.

Not much by way of results on the local front, there was a trading update from PSG after the market had closed, advising that the sum of the parts calculation was 20.6 percent higher than it was in February, that is pretty decent. More impressive is that 7 October that value is 209.35 Rand, the stock closed last evening at 244.59, a pretty significant premium to their calculations. You can’t keep a good company down however, it seems. I am guessing out loud here, if you go back and see how the company traded over the years it is possibly always the case, the share price trading at a premium to the sum of the parts.

Talking results, we are about to enter the heart of Q3 earnings season. Intel, Johnson & Johnson and JP Morgan Chase on Tuesday. Bank of America, Netflix on Wednesday, Citi and Goldman on Thursday, and then a very big one, General Electric next Friday. IBM and Morgan Stanley the following Monday, Boeing and Coke on the Wednesday, Amazon and Stryker on the Thursday, Apple in three Tuesdays time. It is going to be a huge three weeks for earnings and the Boks too! It is certainly the most exciting season for me, the expectations for the current quarter have been set quite low, as a result of Dollar headwinds and perhaps Chinese weakness, the European recovery again spluttering as a result of German data looking horrible. Volkswagen? German engineering untrusted? It takes years to build trust, minutes to break it.


Thanks for sending in your predictions, Blue Steel sent his in, here goes:

Predictions for 10 years time:
Only electronic currency
No more paper
People will be self sufficient wrt energy and partially on food.
Work a three day week of 8 hours a day, free time will be spend 3D printing most of your home items
and I will own a driverless hovercraft…

I am not too sure if he is serious about the last one. The others sound closer to reality, not so? Anyone else want to give it a go, and be more specific as to which companies one could also own around your predictions. In other words, only electronic currency would be very good no doubt for Visa as a business, energy efficiency and off the grid would be very bad for Eskom. Partially on food might be good for Monsanto and Syngenta, not good for Woolies or Tiger Brands, that sort of thing. Working three days a week and being more homebound is good for Netflix, Apple, not so good for the oil producers. Send yours in, we can publish it.


Linkfest, lap it up

The human brain is something that we still have a long way to go to understand properly – Strong placebo response thwarts painkiller trials. It seems that the placebo effect has become stronger in trials due to more direct advertising telling people how much painkillers can do for them.

Amazon is adding a new service/market to their list of online platforms – Amazon Challenges Etsy With Strictly Handmade Marketplace. If you are looking for something that is handmade, which is a growing market in current social trends, then you can now use Amazon Handmade. I think this is a great way to get more people involved in the economy.

Earnings releases seem like the perfect role for Twitter, some companies are starting to do that now – Goldman Sachs Earnings Are Moving to Twitter. Good news for Twitter, who have been having a tough time growing their number of users.


Home again, home again, jiggety-jog. No rugby to “worry about” over the weekend, that is the good news. Kick back and relax out there sports lovers, markets in Europe are going to open higher, we should too. I don’t want to complain, most of you countrywide have had to deal with drought conditions, our heat wave here has been energy sapping. I guess we have human ingenuity to thank for aircon, not any government or grand organisation. Willis Carrier is the “father” of the modern air conditioner, the business he founded Carrier Corporation is now part of United Technologies Corporation, a Dow Jones Constituent. Thanks Willis Carrier!


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

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