Santa came

“Hey, did you know that in March next year, the S&P 500 turns 60 years old. Baby boomer era, perhaps just afterwards. That is the current form, the original form finds itself way back, nearly 90 years old. Which is why the Dow Jones gets all the attention, that index is around 120 years old, double the age of the S&P 500. The first 28 days of 2016 were the worst ever four week start for the S&P 500. Do you remember what it was about? Chinese growth concerns, remember? I bet you don’t.”


 

To market to market to buy a fat pig It felt like we were a little cheated, stocks ended half way up the hill. We were up (so we were up) and we were not down (so we were not down), we were halfway up. No thanks to the Grand Old Duke of York. Mr. Market was in catchup mode, the old stocks that were definitely at the bottom of the hill on the session (near the peak on the year) were the resource stocks, down nearly a percent on the day here in Jozi. Financials added nearly a percent, I see that Capitec touched a 52 week high (and all time high) before settling lower on the day, the stock has been nearly a 20 bagger (i.e. their value has increased nearly 20 fold) in a decade.

The term ten-bagger was coined by legendary fund manager Peter Lynch, a man who didn’t mind scratching deep in uncharted territory to find that extra special stock. Lynch is still regarded amongst the best investment managers of all time, taking his first job at managing money and turning a 18 million Dollar fund into 14 billion Dollars over 14 years. He then retired, to spend more time with his loved ones, seeing as he had missed his father who died relatively young, the same age that Lynch retired, 46.

Some pithy quotes to emerge from such a short and unblemished career, there was a Charlie Rose interview a while back (Peter Lynch Journeys From Funds to Philanthropy) that attracted some attention, my favorite Lynch quote is as follows: “If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.” I guess he is saying that it is all about the companies and not the economy, read annual reports and not long complicated projections. If you have 25 minutes and you are interested in learning about Peter Lynch and his heroics in the investment community, here is a great place to start, this interview.

A quick wrap now of the local markets, we could keep going all day at this rate! The ALSI closed up 0.38 percent, the currency taking a little heat against the majors. Metal and energy prices have stabilized a little, European markets were mixed, France and Germany better, the Italians still trying to figure out the future of their banking systems. I am sure it will all work in the end, it feels a little like the Spanish banking system a few years ago, where banks had to be stabilized and governments ended up with a lot of equity in these businesses. The assets are there, it takes time to work it all out.


 

Stocks in New York, New York slipped from their best levels, we did still see a higher finish, chalk that up as a win for the bulls. The Dow Jones Industrial Average made another assault on 20 thousand points, it seemed more like Dieppe and less like D-Day, fizzling as they went along. The level will come, patience my friends. As Michael reminded me yesterday that in currencies and equity markets it is very important to factor in inflation, that can have a way of sobering the returns somewhat.

I guess all you are trying to achieve in the long run is a careful balance of risk versus reward, expectations of smooth returns are nigh impossible. Talking of which, if you get such returns, something is probably very right or very wrong. See this WSJ piece – Authorities Allege $1 Billion Fraud at Platinum Partners. 1 billion bucks swindled from 600 investors.

Hey, did you know that in March next year, the S&P 500 turns 60 years old. Baby boomer era, perhaps just afterwards. That is the current form, the original form finds itself way back, nearly 90 years old. Which is why the Dow Jones gets all the attention, that index is around 120 years old, double the age of the S&P 500. The first 28 days of 2016 were the worst ever four week start for the S&P 500. Do you remember what it was about? Chinese growth concerns, remember? I bet you don’t. The S&P 500 was down five percent for the month of January, at one point three weeks into the year, stocks were down 9 percent. The worst ever start to a year at that stage. Year to date, Brexit and Trump and all, stocks as a collective (the return of the S&P 500) are up for the year. Russia, Syria, unfortunately more terrorism across the globe, add into the cocktail the Italian referendum. All rather “confusing”. Still, stocks are up, and pretty smartly at that.

The S&P 500 closed out the session up one-fifth of a percent, the Dow Jones Industrial average exactly the same amount. The nerds of NASDAQ added 0.37 percent on a day where some of the unloved part of the markets have rallied a touch. Tech stocks have lagged the broader index, up just shy of 9 percent year to date, as of the close last evening. The Dow Jones has been where most of the action is, up 14.11 percent as of the first trading day of the year to the close last evening. Only two stocks down in that index, including Nike, who report numbers later today.

Wow. I was checking the Disney share price (up one and one third last night, flat on the year), which after a lackluster bunch of numbers the stock slid back pretty sharply. In recent days the stock has caught a bid, mostly as a result of the giant success already of Rogue One in the home market, the US (the new Star Wars film, where have you been?). My daughter tells me the stock surge is thanks to Moana, she has seen it. Well, as of today she (my eldest daughter) is not half wrong, Moana has grossed 163 million Dollars, Rogue One did that on the first weekend!! So I guess it is Star Wars trumping new Disney franchise. Global box office takings for Moana have been 282 million Dollars, the cost of making the film was closer to 150 million Dollars. Rogue one cost 200 million Dollars to make, global box office takings are zoning in on 300 million Dollars. And it has been out less than a week!!

The real money is seemingly in the future of entertainment, what normal people refer to as “gaming”. The average age is around 30, these are working people paying good money for new types of entertainment, now made global by high speed internet. The folks who will provide content will be the kingmakers, the likes of Tencent, Amazon and Netflix, be it gaming, movies and series, all original content being served up and less “old school” type entertainment. Streaming and movies on demand (saved series) have become a way of life now, there is so much on DStv catchup that you would not know where to begin. I still cannot figure out the future of sport, with the live element being all key. Remember that Disney own a large portion of ESPN, surely that must continue to remain a compelling (if not only) reason to own the stock.


 

Linkfest, lap it up

Great link, first found via the Visual Capitalist (which is like internet chocolate) – Unprecedented Spending Trends in America, in One Chart via Howmuch.net. What it shows are the various categories of spend by American households, more is being spent on education and healthcare and housing, less is being spent on transport and food. That sounds like a good thing to me! Clothing spend is dropping, perhaps as a result of machinery and technology advances in clothing manufacturing.

It was great to find South Africa on this list of The Countries With The Most Doctoral Graduates. My only question is, is there a difference to society in different types of PhDs? i.e. is there a monetary value added to society with different kinds of graduates? Can you have too many accountants or too many sociology graduates? I am not sure, does anyone know the answer?

Facebook bought Instagram for 1 billion Dollars just before they listed over four and a half years ago, here is a refresherFacebook Buys Instagram for $1 Billion. Comments on the website should be a giant ignore, these stand out for me: ” … shows that Zuckerberg is a novice. He just got lucky. But that he paid way way way too much here shows that Facebook is in the hands of a kid.”. Another: Instagram is not worth 1 billion dollars and facebook is not worth 100 billion dollars. Lot of the start-up high tech companies is not worth that much. The bubble is going to burst soon. Whilst this article is neither right nor wrong, it shows that the “kid” knew a thing or two – Instagram Is Worth More Than Twitter And Snapchat Combined. 1 to 84 billion in nearly five years. Kid got lucky.


 

Home again, home again, jiggety-jog. Stocks across Asia are mixed, Japanese stocks are up, Chinese stocks are not. The US futures market is basically flat, we may have to wait to get to that mark later, a multitude of terror attacks will see markets a little jittery no doubt.


 

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

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