The Retail Jungle

“So some in the box investors, you could and won’t ever be able to own Amazon until it meets certain metrics, by that time they may well be clocking revenues not too dissimilar to Walmart. And by then perhaps it is too late. Equally Amazon could stumble and fall, Walmart could modernise quicker, it is not something that founder Jeff Bezos (of Amazon, the founder of Walmart is Sam Walton, he died before Amazon started) loses any sleep over.”

To market to market to buy a fat pig. A mixed day for stocks on the local bourse, some up and some down. I was interested to hear legendary investor Bill Miller make the point that the market is not a beast and shouldn’t be spoken about in one sweeping statement (i.e. the market is cheap/expensive), rather it is always for buying specific businesses. The way he used to illustrate that was by saying that today, there will be some stocks that make 52 week highs and equally there will be stocks that make 52 week lows. Same market, divergent performance. As Paul modified a tweet last night (it is called MT by the community):

Of course it matters what the “market” is doing, a little, it is more important what you own and what your perspective and outlook is for the future. So some in the box investors, you could and won’t ever be able to own Amazon until it meets certain metrics, by that time they may well be clocking revenues not too dissimilar to Walmart. And by then perhaps it is too late. Equally Amazon could stumble and fall, Walmart could modernise quicker, it is not something that founder Jeff Bezos (of Amazon, the founder of Walmart is Sam Walton, he died before Amazon started) loses any sleep over. Sam Walton has a fascinating upbringing, being a child of the Great Depression, starting his own store very young, and whilst he ran his own retail stores from his mid twenties, the first Walmart was opened when he was 44 years old. Bezos actually founded Amazon later on in his life, Walton had already opened his first store by that age.

Another snippet, Bezos was an early investor in Airbnb, Amazon yesterday announced that they had shut Amazon Destinations (an online hotel booking service), after the company said that they had learned a lot. Whatever that means. The biggest, by far, operator in that space is Priceline (the owner of amongst others), with a market cap of 66.5 billion Dollars, four times bigger than their nearest competitor, Expedia. I am pretty sure that you know all of these sites and how they have shaken up the travel world. You are now your own travel agent, there is no need (really) to find someone to “help you” in the internet era. There are more reviews, more pictures, more sharing of experiences than any time in history. The internet picture may “lie” the guests certainly do not.

Quickly, back to markets, it was a rip roaring day for the equity markets in New York, New York, no rate hike on the horizon, or is there a chance sooner now? I feel sometimes like screaming, just get it on, just do it. This time, strong weekly jobless claims numbers were measured against a CPI read that was a little lower than the previous one. This led Mr. Wall Street to believe that the US economy was stronger than anticipated, with no chance of inflation. And as such, the Fed can raise rates later.

I am so confused, trying to find reasons each and every day why the market goes up or down, how there is so much overemphasis of the Fed and not enough emphasis placed on companies. We try and correct that. For the record and why it is always better to be in markets than out of markets, the Dow Jones is up nearly nine and a half percent since the lows of August the 25th. Yes. By session end the broader market S&P 500 had added a percent and a half, the nerds of NASDAQ clocked in gains of 1.82 percent, the Dow Jones Industrial strung together an over 200 point gain, 1.28 percent higher by the close. Earnings from Goldman Sachs and Citigroup were well received, even though at face value the vampire squids looked a little “light”.

Back to local (which is lekker, I hope you are dressed in your Bok kit today), here in Jozi, Jozi stocks slipped as a collective towards the end of the session after enjoying gains for the first half. After all was said and done, we closed around 0.2 percent lower on the day. The stronger Rand held back many of the heavyweights, Richemont falling nearly two and a half percent in sympathy with Burberry. The London based company and maker of fine coats, handbags, scarves, shirts, shoes, Burberry, warned that the luxury segment in China was looking patchy at best.

The words Burberry used were “increasingly challenging environment for luxury, particularly Chinese customers” and this was “Amplified by Burberry’s geographic mix”. It is not as big a company as I thought, total sales for the first half was 1.105 billion Pounds, not small, not huge. Mind you, Tiffany’s only does 4.3 billion Dollars annually, Coach nearly 4.2 billion Dollars in revenue, Richemont 11.33 billion Swiss Francs. Christian Dior is more spread, hence 30 billion Euros in global sales. LVMH is possibly the big daddy, (again there is wine and spirits), annual sales are not too dissimilar to Dior, at 33.3 billion Dollars.

Murray & Roberts, many people have been talking about this company in the wake of the collapse of the support structure in a pedestrian bridge that was being built over the M1 highway in Sandton. The freeway was reopened at around 14:30 yesterday afternoon, it was business as usual for the bustling Joburgers. The company has acted swiftly, offering to pay for the funerals of the two deceased and compensating the 20 plus folks injured in the accident. That is good news, the company being proactive in this regard, they could be still made an example of, paying fines to the city. The cash strapped city? I wonder how that would work, the city used vast resources cleaning this up, as no doubt the company did too. We wait and see what transpires here.

What is very real is that Waco, a construction equipment rental business, has postponed their listing. According to Business Day, Waco’s Form-Scaff division had provided the scaffolding to Murray & Roberts. The listing was supposed to be a week today, next Friday. Wow. The same article Waco postpones listing after M1 bridge collapse sours timing suggests that a global road show of 10 months could come to naught. Ethos, the private equity crowd that were exiting (when they exit, beware, I was told recently) must be thinking that their options have been reduced to next to nothing. For now of course, they could come back early next year, or towards the middle of next year.

Linkfest, lap it up

We regularly hear from people that the world as we know it is about to end. The reason given is normally related to debt burdens in one way or another – 5 myths about US government debt. In an ideal world, governments would run a balanced budget or even a slight surplus, which leaves room to spend more when things in the economy go south. That was the case in the US until 2008, where increased government spending helped keep demand up in the economy.

Part of the brand experience of Starbucks is connecting with the barista making your coffee – Starbucks Is Adding Drive-Thru Video Screens to Improve Service. Will this make me order more food than before? Probably not but it reenforces the premium status that Starbucks enjoys in the food/coffee industry.

This is a point we have made often in this blog, the current generation living has it better than any other gone before it – Do Democrats really believe Americans are worse off today than they were in the 1970s? C’mon . . . Technology has brought things to the man on the street that was solely reserved for those with deep pockets 30 years ago, like air travel, long distance communication and dishwashers.

I have often looked at a few guys (larger than me) at the start of a long run and wondered how they are going to get through it, especially since I am likely to just scrape through – I Am Training for a Marathon. So Why Am I Getting Fat?. Like many other things in life this comes down to the mind. We think we work harder than we actually do and then we underestimate the amount of carbs or sugar we take in after the run.

Home again, home again, jiggety-jog. I am sorry for you fellows away from Gauteng, the least talked about rugby happens this weekend, with the final no doubt here in the province next weekend too, more than likely a South versus North battle. The Lions will take it and wrestle it back away from the blue and white hooped chaps in Cape Town. Sorry. The more important rugby of course is happening in London this weekend, hopefully we can put the Welsh away and be in the semi-finals the following weekend. Hopefully.

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

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