Half Century

“Paul turns 50 today, that is pretty big news, half a century, bat up! In all the years I have known Paul (I think 17 now), he has never looked better, really. And of course you know that thing about class and experience. Cheers to the best co-worker a colleague could ever have (and the others)!”


 

To market to market to buy a fat pig Stocks in Jozi slipped, the Rand firmed up, the resource complex was stronger except for platinum and in particular gold shares, both of which were heavily down on the day. The Chinese ban on insurance companies and their ability to own stocks weighed on TenCent and by extension Naspers. TenCent is trading at the lowest level since early August, I suppose that is not “too bad”. The oil price soaring to the best levels of the year saw both Sasol and BHP Billiton at the top of the leader boards. MTN, with a presence in Iran and Nigeria, significant oil reliant nations also perked up to stand in a sparsely populated winners segment. In the losers column were the single commodity stocks, and in particular AngloGold Ashanti and Amplats, Mondi and Naspers also feeling the heat.

There were still some 12 month highs for the likes of Barloworld and several of the banks. Although for the banks the timing 12 months on from the sacking of then Finance minister Nene (how is that non-existent job at the BRICs bank going?) led to an almighty collapse. Still, since mid December 2015 Standard Bank is up 44 percent, FirstRand is up 31.5 percent, Barclays Africa is up 20 percent and Nedbank is up the same as FirstRand. And still, at face value, the banks look cheap. The issues are that if we were to experience a downgrade to non-investment grade, the banks would have to raise capital to shore up reserves, that is how I understand it. And significant sums too.

As you can imagine, there is not too much going on in the companies front, the roads are quieter already, that you can tell. The parking lots still look full, perhaps next week the great GP exodus to the coast (and other places) will happen. I suspect over the weekend I may get my wish of a less busy Jozi. Take it easy out there on the roads sports lovers. And lest I forget, Cape Town, what a show you put on over the weekend, next year ….. I may well be there! It will be fun no doubt, perhaps we can reclaim that crown.


 

Over the seas, across the time zones and into a hemisphere where it all looks pretty until you have to step outside, stocks in New York, New York were mixed. The Dow Jones Industrial Average clocked another closing and intraday record high, now around 200 points away from printing a new cap. Yes, there are fellows who have Dow this and that, Paul got me one, it reads Dow 36,000. I wear it from time to time, it never raises a reaction from Joe Public. Sigh.

The other majors sank, the broader market S&P 500 lost just over one-tenth of a percent, whilst the nerds of NASDAQ fell 0.59 percent. JNJ had a cracking day, having seen a little weakness lately, healthcare in general and the pharma stocks enjoyed the best of times. Amgen added 1.6 percent, the stock certainly looks amongst the cheapest around, I saw that it made it to a list of best ideas for one of the major investment banks.

A tweet from Trump making all sorts of noises about the defence contractors, first it was Boeing (and his facts may have been wrong, what a twist), this time we saw all sorts of dumb writing (I am sorry), including this one – Lockheed Martin shares drop after Trump says F-35 program too expensive “After the tweet, the company’s market value initially dropped $4 billion. The impact of Trump’s tweet, per character, was more than $28 million.”

Over the last ten years the stock is up 175 percent. Over five, a more impressive 226 percent. Over one month, the stock is down most of what the market sold off yesterday. That makes for a much less fun headline or interest piece. As Michael said this morning, nobody dipped into their (Lockheed Martin) bank account to “steal” or “take” four billion Dollars. And tomorrow the stock price may go up again. Have they gained or lost anything, the shareholders that did nothing? No.

Defence stocks are “interesting”, remember that the inventor of dynamite, Alfred Nobel, sees his estate give away loads of money for the likes of Peace and Medicine each year. Hey, did you know the following about the Nobel funds in the foundation (from the last annual report): “a portfolio strategy of 55 per cent equities with an interval of -15 to +10 percentage points, 20 per cent fixed income assets with an interval of about 15 points and alternative assets, including properties and hedge funds with an interval of around 20 points.” And at year end (2015), the foundation had operating expenses of 2.6 percent of the overall assets. In other words, everything they earn in excess of that is added to the pot for future generations.

We digress, my point is that defence inventors and manufacturers often make strides for commercial use later. The Radar that lead to safer air travel (add in the jet engine too) and the microwave oven. Duct tape. The internet. Now we have internet on a jet plane. Satellites, enabling broadcasts from around the world, beamed into our homes. Digital photography, every man and his dog is a photographer these days. With their mobile phones. The Epipen, GPS, freeze drying, even cargo pants and the jerry can come from military production. Even penicillin, synthetic clothes and canned food. The wristwatch. And of course more recently, the drone and associated technologies.

I am mixed on owning these in a stock portfolio. The one side of me says that there is not only good in the world, there are forces at work who look to destroy what many hold dear, their personal freedoms. As such, we need to be able to counteract these forces and that means weapons. The other side of me says that these advances from science (the science of improved destruction in a way) will improve humanity in the end. How do you feel about it, and should large parts of country budgets be spent on the military?

It is an interesting question, I guess Trump just wants to know whether the US taxpayer is getting bang for their buck. Military planes are amongst the most expensive pieces of equipment known to man, whilst a Dreamliner costs 225-300 odd million Dollars, a B-2 Spirit Stealth Bomber (Northrop Grumman built it, at a program cost of 44.75 billion Dollars, roughly their current market cap) cost 737 million Dollars in 1997 (and costs nearly 4 million Dollars a month to maintain). Currently that equates to around 2.4 billion Dollars. There are only 20 of them, if it makes you feel any better. What could you do with 2.4 billion Dollars I guess is the questions that need to be asked.


 

Linkfest, lap it up

Given how big the initial investment is when building a power plant or even when buying a car, changing the way people consume energy has to be a long term project. Bill Gates has assembled a group who are willing to part with their money for 20 years, to invest in clean energy – Bill Gates and investors worth $170 billion are launching a fund to fight climate change through energy innovation. South Africa is representing in the list through Patrice Motsepe.

Sticking with philanthropy, to reach Mark Zuckerberg’s goal of curing, preventing or managing all disease by the end of the century will require input from all sectors – A Few Billionaires Are Turning Medical Philanthropy on Its Head.

Another great blog from Ben Carlson. Controlling your finances can be like controlling what you eat, very difficult – Mindless Eating & Finance. There is a large amount of research that shows, self control and motivation is a very limited resource and it runs out rather quickly. How do you get things done then? Put systems in place when we do have self control on our side. An example is setting up that debit order for forced savings at the start of each month.


 

Home again, home again, jiggety-jog. Stocks across Asia are a mixed bag. We are in a bit of an earnings void, remember that for the short term folks, the most important thing this week is the Fed announcement, will they or won’t they raise interest rates? Some are doubting it, even though the odds have been pretty high this year, I would suggest that most of it is baked into the cake. the most important thing however here at Vestact is that Paul turns 50 today, that is pretty big news, half a century, bat up! In all the years I have known Paul (I think 17 now), he has never looked better, really. And of course you know that thing about class and experience. Cheers to the best co-worker a colleague could ever have (and the others)!


 

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

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