Hold. . . Hold. . .

“Yesterday the SARB MPC delivered their verdict of the lay of the land. Their view anyhow. Which has been a little rosier than most over the years, perhaps they share my optimism. Firstly – Statement of the monetary policy committee. The flows post the US elections have been away from EM. The Reserve Bank Governor Lesetja Kganyago said something that we are all worried about: “The prospect of rising protectionism and its implications for world trade are also a concern.”


 

To market to market to buy a fat pig Yesterday the SARB MPC delivered their verdict of the lay of the land. Their view anyhow. Which has been a little rosier than most over the years, perhaps they share my optimism. Firstly – Statement of the monetary policy committee. The flows post the US elections have been away from EM. The Reserve Bank Governor Lesetja Kganyago said something that we are all worried about: “The prospect of rising protectionism and its implications for world trade are also a concern.”

With these new levels for global bond markets and expectations for interest rates to rise, the expectations for inflation has risen on the local front. The inflation outlook has deteriorated a little as per the Selected forecast results: MPC meeting November 2016. Some of the hardest things to do are to make these types of assumptions, equally they had these Summary of assumptions on growth and exchange rates, as well as food prices and government debt. For those with debt the REPO rate is not expected to rise through 2018, that is at least the forecast based on the current assumptions.

Growth rates are anaemic. It is possibly fair to say that any government intervention in the economy has not yielded the results that they would have wanted. That is a political ideology debate, one that you will not win. It is not easy for the haves to understand the past as much as the have nots, most especially as a result of our history of separation of races, which was also a separation of economies and opportunities. Eduction is key to the change of everything, if everyone has quality education, the doors to extra opportunities open. Again, the ideological debate around what the state should or should not do in the economy is another matter entirely. For the time being the large part of the voting base has given their mandate to the state that has their own ideas of how economies should work. So, until either the ruling party changes their ideological approach, or someone else is given a chance, expect more of the same for the time being.

And. Wait for it. There is the small matter of Moody’s making their decision on South African sovereign credit ratings today. Standard & Poor’s decide next week. Fitch before the year is out. Last week Bloomberg had the following article – South Africa Junk Rating Seen Inevitable, This Year or Next. The article suggests that even if we get a pass now, the chances of us hanging onto investment grade through next year is around 20 percent. Like Lloyd Christmas says to Mary “Samsonite” in Dumb and Dumber, “So you mean there is a chance?”

Seeing as yesterday was when turkeys were being devoured left right and centre, pumpkin pie and all the rest, thanks being given for all sorts of small (and big) things, volumes and direction was hard to come by. At the end of the session the all share index had lost 0.11 percent, resources rallied nearly a percent and a half, financials fell nearly one and one-quarter of a percent. The gold price since the Donald became president elect, the gold price is down around 8 percent. Why? The strong dollar often brings about softer commodity prices. Yet ….. commodity prices, other than precious metals have caught a strong bid as Trump suggests big infrastructure build. We will see if he (the US) can afford it, or has the gumption for it. And, at the same time the Fed is likely to raise rates in December. No, not likely to raise rates, definitely will raise rates, the markets have it at 100 percent.


 

Company corner

Bidcorp delivered another trading update to analysts yesterday. It was a Management update on general trading conditions. This follows on a similar type of statement from two weeks back at the AGM. They talk about Brexit and currency volatility. In their UK operation they have managed to lock in a customer for the next five years and the pipeline looks good, the market is fragmented and they have an opportunity to consolidate further. Eastern Europe looks better than Western Europe. The South African business amongst their emerging market businesses looks decent enough. Mainland China is good, Hong Kong not so much, the tourist numbers are lower. Things in Brazil have seemed to have steadied.

What is pretty amazing is that they have managed to make 8 bolt-on acquisitions. And it is all around, Brazil, Italy, the UK, Belgium, Australia (3 businesses) and New Zealand. They even suggest that they could be in the business of looking for new geographies. All in all, a lack of food price inflation is a bit of a negative (that may change), in the UK there are early signs that it may pick up. My take from this general update to the investor community is that the company has seen volatility, all is good in the hood though. Better than people anticipate. We really think that this is a great investment theme. Food preparation and more people eating out. We maintain our buy rating on the business.


 

Linkfest, lap it up

This is a great display of what solar can doTesla powers a whole island with solar to show off its energy chops. The article doesn’t say how long this solar system needs to be in place to recoup the cost of building the system, none the less this shows where the globe is heading.

Having context of market history doesn’t help us predict the future but does help us understand the different emotions that drive markets – How Things Have Changed on Wall Street in the Last 50 Years. The biggest change is probably how fast information is spread and the rules limiting insider trading.

The next generation of computers is quantum computing, which will use quantum physics to change the way computer chips process information – Microsoft Spends Big to Build a Computer Out of Science Fiction. If Microsoft makes the break thorough to develop this system, it could be huge for R&D breakthroughs in the drug industry.


 

Home again, home again, jiggety-jog. It is a half day in New York today, expect another low volume day. Japanese markets are marginally higher, Chinese markets are looking better. US futures are around one quarter of a percent higher on the Dow, a little less on the S&P 500 futures. We should start a little better here. There will be Naspers results today. And whilst it may be the hustle and bustle through Black Friday today (and Cyber Monday), as well as just being one month to Christmas. Yes. Today is a month away from that.


 

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


 

Attention: One of our sub-tenants is moving to Cape Town so we have some open offices to lease. There are 2 spaces available, one is 32 square meters, the other is 12 square meters. Fully serviced, in Melrose Arch. Please get in touch if you are interested.


 

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