iPhone is ten, Dow is 19999.63

“Apple has got an official release from their website – iPhone at ten: the revolution continues. Unlike a socialist revolution (where technology is stifled), this is raw capitalism. In that time, since the iPhone birth, the market cap of Apple (according to Google finance) has gone up 870 percent, nearly a ten bagger in ten years, which as most investors know is an exceptional feat.”


 

To market to market to buy a fat pig Yowsers. Last week and the up and down on alternative days culminated with a big gain on Friday for equity markets, the All Share gaining nearly one and a half percent, to comfortably above 51 thousand points. Pretty much everything across the board. It has been tricky to try and understand what Mr. Market here locally is trying to decipher, who are the participants, and who are not. The “not” are the sellers and are those who are making real life money decisions to step away and look to developed markets for options. In particular the US, which we will get to in a minute (of your reading, not my writing).

Naspers rallied nearly 5 percent, MTN over three percent. I suspect that the oil price rallying hard is definitely a benefit for MTN, operating in both Nigeria and Iran, who are big oil producing nations. The oil price predictions are about as useful and reliable as your favourite mid table sports team pre season predictions. In other words, not useful. This time last year, when commodity prices were getting drilled and some stocks were trading at multiple decade lows. Since then, these stocks have rallied back hard whilst industrials have performed poorly in a patchier operating environment.

I recall some of the best in the business, such as the Goldman commodities fellow, Jeff Currie, made some bold calls and some base cases (not just him) were for oil prices of 20 to 30 Dollars for the foreseeable future. There have been many a government in a tight spot, those reliant on oil exports for revenue, from Saudi to Venezuela. The citizens in these places must be feeling a little worse for wear, as the respective governments scramble for more revenue. No wonder OPEC finds it hard to ask each country to stop pumping.

In principle it would remove supply and add to prices, US frackers have returned to markets and must be as pleased as punch with the higher prices, adding rigs regularly since the bottom in April last year. In short, even if you are the king of making bold commodities predictions, keep them to yourselves. Or read this, the folks sticking their necks out are a brave bunch – The craziest oil price predictions for 2017. I had forgotten that an analyst at Standard Chartered predicted 10 Dollars a barrel oil prices – Oil could crash to $10 a barrel, warn investment bank bears.

Recency bias is something that plagues even the most powerful predictor-bots. i.e. If the price falls, then our immediate feeling is that the price will continue to trend lower, the opposite is also true. If the price of a stock, commodity or currency rockets up (or barrels down), it attracts an enormous amount of attention. People love greed, they love fear even more. Watching glued to the screen as something happens, not wanting to miss out or not wanting to be part of the train wreck. BP? Didn’t go out of business. VW? Nope, not them either. Of course there are examples of large institutions hitting the wall, Lehman and Bear. That was a humbling time for investors and a YUGE reminder that Mr. Market can go against you in ways you would never have seen.

Anyone for Bitcoin? Ha-ha, that is wild. No thanks. The fact that the “currency” is “mined” and priced in US Dollars and dominated by speculators. And around the “size” of Vodacom. Or Kinder Morgan. And I know that I would rather own those two than something that is supposedly the currency of the future. Not going to happen and be adopted by the masses (my prediction). And now ……. I am waiting for the people who think that I am a giant idiot and don’t understand the future. Yeah, I will take my chances by investing in real businesses that don’t “create” a crypto currency. Sounds more like Ben the Helicopter to me than the Fed?


 

Across the oceans and far away, it was Dow on 20 thousand watch again. Firstly, there was a jobs number, the monthly non-farm payrolls number – Employment Situation Summary. Missing expectations at the top-line, good enough for Mr. Market I guess to be “ok” with it. The biggest news of the day was of course watching that level. Just a level though ….. Dow 20 thousand. Still, a nice level.

The Dow got within 0.37 points. 19999.63 points. No cigar unless it is a real print. I am guessing that we will have to continue to wait for a while for this milestone. The Romans invented the milestone and in fact the Milliarium Aureum is said to have been the centre of the Empire, near the Temple of Saturn in Rome. That is where the Golden Milestone was said to have been erected. And from there, the phrase all roads lead to Rome was founded.

All roads lead to Dow 20 thousand? Yes. In fact, the march onwards does not really require massive moves in equity markets. If the Dow recorded 7 percent per annum returns from here, by the time 2027 rolls around, the Dow Jones will be at 40 thousand points. So the levels sound huge and compounding interest is a long term investors best friend. Put the one third of a point in a pipe (not a real one) and smoke it, 20 thousand will come sooner rather than later.

Session end the Dow closed at 19963, up one-third of a percent, the nerds of NASDAQ added six-tenths of a percent, whilst the broader market S&P 500 managed to tack on 0.35 percent. An intraday and all time record for the tech heavy NASDAQ, 5500 points hardly sounds like a YUGE number. Nonetheless, tech stocks have come storming out the blocks “this year”. They (the index as a collective) have also doubled over the last 5 years. Of course 5 years ago there was no Facebook yet in the index, so indices evolve and different stocks dominate, which is what makes passive investing so attractive for people who do not have a passion for owning single stocks. The S&P 500 also printed an intraday all time high. All the focus was on the Dow. It is a point worth making that the Dow also printed an all time high, three all time highs on one day.


 

Company corner

It is the 10 year anniversary of the unveiling of the first iPhone to the public. Obviously the design team and the top management had seen the product and had worked with it before the unveiling. For us mere mortals however, it was the first time that we had glimpsed the future. At the time I remember not thinking too much of the product. I met a fellow shortly after who had an iPhone 1, the original version. The first iPhone I ever had was the 3G version. Since then ….. I have been hooked and become a bigger part of the Apple ecosystem. Before that, I only managed to own an iPod, remember those? I may frame it, use it for art or something like that.

The iPhone is the most successful consumer product of all time. July 27 2016 was the day that many consider total unit sales ticked over to 1 billion – Apple celebrates one billion iPhones. 50 million by April 2010, 500 million by June 2014. Obviously, as more people get the product and prefer it to others, the “refresh” cycle means that more and more people get it. I noticed that the contracts have become a little more complicated and imaginative.

Apple has got an official release from their website – iPhone at ten: the revolution continues. Unlike a socialist revolution (where technology is stifled), this is raw capitalism. In that time, since the iPhone birth, the market cap of Apple (according to Google finance) has gone up 870 percent, nearly a ten bagger in ten years, which as most investors know is an exceptional feat.

With a market capitalisation currently of 635 billion Dollars, the quest in the race for the trillion Dollar market cap continues. Who knows what device, wearable or not, will be adopted at the same rate as the most successful product of all time. And to think that the vast majority of smartphone users out there do not have this fine product, it is a “rich people” product at many levels. We maintain our buy recommendation on the company, the fundamentals are certainly favourable, and if you strip out the 240 odd billion Dollar cash pile, you get some pretty exciting metrics. With the “new form” apparently coming this year, it is going to be fun to see what the consumer adoption rate is likely to be. Hey Carl, how is that sale of Apple going?


 

Linkfest, lap it up

The whole idea of communism sounds appealing for the bottom part of society, the bottom part economically speaking. In theory a lot of things work, in practice, discounting the individual leads to an almighty mess and misery. The Russian revolution will turn 100 this year, both starting and ending in 1917. This article (one sided of course) shows the destruction caused along the way – A century of Marxism-Leninism.

7 self-driving car milestones to look out for in 2017. We own some Tesla (Opinion and biased piece: Why Tesla Motors Will Rally Strongly Due To Chinese Growth) shares for clients. All the motor vehicle businesses are switching at a rapid rate to EVs (Electric Vehicles), equally, self driving cars. What this means for the future of oil markets is not really understandable, we would have to wait and see.


 

Home again, home again, jiggety-jog. Jozi is back at work. You can tell. I had a terrible Tintin haircut over the weekend, don’t laugh when you see me. At least I don’t have a wire hair terrier, I have a set of dumb dogs. Stocks are a little mixed, Shanghai is up, Hong Kong is flat and Japanese stocks are a little lower. Dow Futures point a little higher. I am quite interested to see all of the big brick and mortar retailers in the US cutting tons of jobs and what that will mean for non-farm payrolls in the coming months. Markets have started a little higher to begin with, early days here!


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

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