Long Optimism

“Somehow, and we say this a lot around here at Vestact, the person that spews bad news seemingly is smarter than the optimist. Yet, the very nature of the equities market is to back the raiser of capital, to back the person with a grand plan, to be part of the business. “


To market to market to buy a fat pig A good day on our markets Friday which received an afternoon boost after the US jobs report showed the US jobs market was weaker than expected. That means lower interest rates for longer (unless the next jobs number says otherwise), so more money flowing into emerging markets where there is more yield. The Dollar weakened on the US labor market news too, going from the $/R14.60s to $/R14.30s.

So what were the jobs numbers? The US economy added 151 000 jobs in August, when forecasters had expected 180 000 and the unemployment rate stayed at 4.9%, where forecasters had expected it to fall to 4.8%. The reaction from the markets over this news was positive. So at the moment it seems bad news is good news? Maybe or maybe not, I think adding 14.2 million jobs over the last 6 years is still good news and sitting below the 5% unemployment rate is also good news. Add to that, the July figure was revised higher from 255 000 to 275 000 new jobs. The Dow was up 0.4%, The S&P 500 was up 0.42% and The Nasdaq was up 0.43%.


I saw that one of my favourite bloggers Morgan Housel moved homes over the last week and a bit. Morgan is the steady Eddy of finance blogging, he keeps drumming away at the same old. Ignore the noise, keep an eye on the bigger picture, the perfect cheerleader when the chips are down. He points out the obvious quotes that should make us feel warm and fuzzy inside all of the time, the Peter Lynch quotes such as “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

Somehow, and we say this a lot around here at Vestact, the person that spews bad news seemingly is smarter than the optimist. Yet, the very nature of the equities market is to back the raiser of capital, to back the person with a grand plan, to be part of the business. There are great ideas when you said as a teenager, I wish I thought that up. Well, when you grow up and have more money to save, you can be part of that. We are optimists, it has served us well in the past, and no doubt will serve us very well into the future.

There are dreamers with masterplans, the one that generates a large number of emotion is Elon Musk. Some people think that he is just nuts. The fact that he doesn’t seem to care about cash burn, relative to the actual goal with tangible results should horrify and excite you at the same time. He did not think that Tesla would work. At the end of the day, it is the product that people need to be receptive to. Tesla is one of those products. I have no doubt that all the other motor manufacturers are working on similar affordable products, Tesla seems to be shaking things up.

If Musk fails, we all fail to be part of the driverless electric vehicle revolution. The richer people are, the more likely they are to be receptive to ideas that are good for the environment. It doesn’t seem fair that we should care about changing our energy consumption patterns when not everyone goes to bed with a full stomach, yet we know that climate change impacts the most on the vulnerable.

I quite like that Elon Musk is on a mission, he does care about what investors think, he is alongside them. He wants to prove the naysayers wrong, produce an amazing products and build a network that changes humanity. For him it is more about changing humanity than the money. There is an important lesson in that. If the goal is to only make money, i.e. that is your starting goal, your success rate is diminished. If your goal is to change humanity, you probably will take enormous risks and might get rich doing it. Elon Musk sleeps at the end of the production line, he so badly wants to get this right. He isn’t out at night attending gala dinners and drinking the finest beverages known to mankind. He may get it wrong, there is always that possibility, if he gets it right (and I would not want to bet against him), we are all the richer for it, shareholders or not.

Peter Lynch, one of the most revered investors of our time, was spot on with that quote. The more I read and see, the more I see people worrying about the big next crash. Drawdowns of ten percent will happen frequently as you invest and along the way. If it is not for you to stomach, then you should not invest, or pay less attention. The same company, with the same earnings can be rated 50 percent worse by the market (the share price) based on the current information. You have to deal with the fact that you have no control over the stock market and the equity prices.

In the same way, that if you are sitting in an airplane or swimming in the sea. For whatever reason, people are afraid of flying, yet they are perfectly happy to jump behind the wheel of a car on a road where someone with 30 hours of driving experience and a brand new drivers licence can travel at 32 metres per second alongside them. Think about it. Swimming in the sea, are you going to get chomped by a shark? No. Statistics suggest for every one person killed by a shark, 25 million sharks are killed by humanity. Ouch, the sharks in the sea are having a bad life.

Your investing approach should be for the long, long haul. It feels very lonely at times. There are definitely times that you are not going to get it right. There are times when you continually question your thesis. There are times when you wonder if there is a better alternative. There are times when you wonder why you own this one, and not that one. If I had a proverbial buck for every time I heard someone say, “I knew I should have done this”, which is mostly in reference to selling a stock at the last elevated price point, I would not need a salary. It is very easy to look back at a stock chart and be smart, it is impossible to predict what the collective, armed with current knowledge and navigating the waters of the unknown, are likely to act.

The conclusion should be the same as ever. You can’t change politicians and their actions, that is for the majority. You can’t change central banks and their rates trajectory. You can’t change the last US non-farm payrolls number and you have absolutely no control over it either. Or the next 240 non-farm payroll numbers (the next 20 years) either. Like everything in life, worry more about what you have control over and less over what you don’t have control over. And that way, you will be a far happier investor in the long run. And you will probably be far better at it too.


Linkfest, lap it up

Becoming entrenched in the business market is a very good step for WeChat. Once being entrenched in business systems it means that you have a very ‘sticky’ customer, where it is difficult for companies to change the way they do things – Tencent’s ‘Super App’ WeChat Is Quietly Taking Over Workplaces In China.

Given how much money is at play on the stock market and how impatient we can be as society, it has lead to some unusual things that the market tells itself – Ten Insane Things We Believe On Wall Street

Home again, home again, jiggety-jog.

Our market is up again today, with commodity stocks leading the way. The Rand is also looking a bit stronger to the US Dollar. It looks like it will be a quiet week for Macro economics news, for company news we are expecting results from Discovery, Steinhoff and Aspen.

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

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