Is Pravin Trouble?

“That could mean almost anything. Minister Gordhan suggested that the charges against him were without merit. They are designed to distract him and the timing is fishy, the medium term budget speech is just around the corner. If someone is using organs of state to remove the holders of the keys of national treasury, I am pretty sure that we will find out soon enough.”


 

To market to market to buy a fat pig There are many, many things beyond your control as an investor. One of them, and really big, depending where you live in the world, is politics. Where there are ulterior motives at work that upset the apple cart in a big way, there is nothing you can do, other than watch the apples tumble. Perhaps there are not even ulterior motives, perhaps there are known knowns. Equally, there are unknown knowns. Ex United States Secretary of Defence Donald Rumsfeld is where this term comes from, the full piece is almost as priceless as the day that it was uttered:

“Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.”

 

That could mean almost anything. Minister Gordhan suggested that the charges against him were without merit. They are designed to distract him and the timing is fishy, the medium term budget speech is just around the corner. If someone is using organs of state to remove the holders of the keys of national treasury, I am pretty sure that we will find out soon enough. We can all guess, we can all suggest that we know (known knowns). Who knows, perhaps the minister of finance is not squeaky clean, the vigour of which this is being charged at almost seems like a case of wanting to hang the boy that stole the apple. The one that stole the pile of gold, well, that process is taking place at sloth speed (seemingly). At the end of the day, there is nothing you can do about politics. It isn’t perfect anywhere in the world. Is the Nordic model the most perfect? Who knows, history judges in the end.

The upshot of it all is that the currency weakened significantly to the majors, and SA inc. was not wanted, most especially financials. A downgrade threat looming means that banks possibly have to raise more money in that environment, collectively those stocks were down three and a half percent. Equally, local retailers were sold. The top 40, which is more than a little littered with Rand Hedges, enjoyed a good day, up nearly two-thirds of a percent. The overall market rose a bit, up 0.43 percent by the close. The top six down stocks were financials and banks, Nedbank down 4.4 percent, FirstRand down nearly 4, Standard Bank off 3.6 percent. There were winners, in particular one that caught the eye, Richemont. That stock caught the weakening Rand with both hands, there was however related company news that saw the Swiss Luxury maker end the day just over six and two-thirds of a percent better.

It has been a tough year for all luxury goods manufacturers, watches have been a no-no. Non! That is French for no, ok? French luxury goods business LVMH, synonymous with fine bags, champagne and cognac, (as well as perfumes, shoes, accessories, watches and jewellery) beat expectations when they reported earlier in the session. Asia improving “significantly” and demand for fragrances and leather goods driving the 6 percent top line growth. Hong Kong continues to suck wind. Tourism to mainland Europe has been dampened since the terrorist attacks in Paris last November. This may be a fleeting moment, it may equally be the start of a gradual and slow recovery in luxury goods.

The brands themselves, as I have always said, are timeless, and with each year that passes, they become more and more valuable. The oldest of the lot on the handbags (and other goods) front, Louis Vuitton (founded in 1854) itself, is iconic, and stands as tall as the old (the Eiffel Tower and Big Ben), as well as the new (the Burj Khalifa and the Shanghai Tower). Bulgari on the jewellery front is equally an amazing brand, 122 years old this year. One of the oldest brands in the world, as far as my back of the matchbox research is concerned, is Stella Artois. The logo was apparently first used in 1366. Back during the dark ages, the plague and so on. LVMH, well, that is a little more classy.

So what to do? The burning question? You know, I know. I think it depends on an individual by individual basis. Should you invest offshore? Yes, do not do it for the wrong reasons, to escape the Rand. Do it as wanting to diversify and to own the quality. Multi nationals, hard currency, great growth prospects. There are still many of those kinds of companies listed here on our exchange. We are lucky to have an exchange that is far larger in comparison to our economy, at a global level. That is for historic reasons. If you are really anxious, chat to us, email us, call us, WhatsApp us.


 

Over the seas and far away in New York, New York, stocks slid away through the session. Alcoa was dealt a pretty sickening blow, down nearly eleven and a half percent. The aluminium business is a tough one at the best of times. The business is set to split in a few weeks and both the engineering products division that will be named Arconic, and the production business (retaining the name Alcoa) are both seeing mixed current and future flows. It seems like a great business on paper, continued demand, more people in cities across the globe needing everything from transport (aerospace) to drinks (out of cans). Too cyclical and too prone to feast or famine, give it a wide steer, unless you are happy to try and pick twists and turns in the cycle. For the record, the company is not that much bigger than Twitter. And Alcoa is nearly 120 years old, whilst Twitter is just over ten years old. Makes you think, doesn’t it?

The other event happening yesterday was Warren Buffett releasing his tax data, basically rubbishing Trump, see the New York Times article – Buffett Calls Trump’s Bluff and Releases His Tax Data. You can read the full Buffett piece here – Some Tax Facts for Donald Trump. I love that single line there from the Oracle of Omaha:

“I have paid federal income tax every year since 1944, when I was 13. (Though, being a slow starter, I owed only $7 in tax that year.) I have copies of all 72 of my returns and none uses a carryforward.”

 

Using my trusty inflation calculator, 7 dollars back in 1944 is the same as 95.32 Dollars at the end of 2015. Bearing in mind that back in 1944 Buffett was still a teenager. Also, the other thing I find very interesting is that Buffett leaves a number at the bottom. 402-346-1400. Give it a call?

Stocks closed a session dominated by a Dollar that hit an eight month high, Mr. Market expecting the Fed to raise rates in December. They will do what they will do. The Pound continues to be battered left, right and centre, stand firm old chap, steady as she goes boys! Apple added a little, Samsung recalls of some 2.5 million phablets weighed on that company, the stock in Korea down 8 percent during the day. Apple added one quarter, not exactly a large amount (seemingly), around 1.6 billion Dollars in market capitalisation. That in itself is astonishing, the amount of value that Apple added for their shareholders as a collective is the combined economic output of the entire Cabo Verde islands. Makes you think.

In the end, the Dow lost 200 points (or 1.09 percent), the broader market S&P 500 sank one and a quarter of a percent, whilst the nerds of NASDAQ were beaten the most, down just over one and a half percent on the day. Healthcare stocks were down the most, over two and one quarter of a percent as a collective.


 

Linkfest, lap it up

Stock analysts at some of the biggest investment banks probably have the best knowledge of all aspects of the companies they cover. Even with that knowledge, predicting what the stock price will do over the next couple of months can’t really be done – Goldman flips its call to sell Caterpillar stock after watching it climb 31% this year.

Nike had some fun recently building the shoes seen in the Back to the Future movies – I thought Nike’s self-lacing sneakers were a gimmick. Then I tried on the Nike Mag, and now I want a pair

If you read anything this week, let it be this. Market returns are very lumpy, which makes sense, if investing in stocks was easy everyone would do it – The Consequences of Risk Taking.

“jumping in and out of the markets for no good reason is one of the biggest reasons so many investors fail to keep pace with the market averages. I’m not saying this is impossible to pull off, but research shows the vast majority of investors would be better off sitting on their hands instead of constantly trying to time the markets.”

 


 

Home again, home again, jiggety-jog. Following on from a poor trading day in the US, stocks across Asia have followed suit. Earnings season in the US has just begun, it is our favourite time of year. I am sure that will steer markets in the coming days. We will watch and report.


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

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