Teeing up with George

“Thanks to the pioneers of the electronic trading systems, we can all tee up on the same course as George Soros (to use golf as an analogy) and think we are going to dispatch the ball down the middle of the fairway right next to the green. A chip and a put in, hey, the expensive training courses and the adverts make trading look so easy! In reality, there are more losers than winners.”


 

To market to market to buy a fat pig Stocks as a collective in Jozi, Jozi eked out a gain. A little one, 0.06 percent higher on the day as the bell had rung for closing time. Industrials slipped and dipped and were pipped, financials were marginally higher and resource stocks were the biggest gainers on the day. And Faf was a genius at Newlands, it was a pity that the best blocker in the modern era (in our team) couldn’t beat the best blocker of yesteryear (Kirsten) record in a limited overs match. Irony, right?

Glencore, Barclays Africa and Steinhoff were at the top of the winners boards, MTN, Redefine and Aspen on the losing end of the sheets. This morning there is an announcement from Brimstone that they plan to list Sea Harvest, a well known fish household brand here in South Africa. Is fish business a good business to be in? I really am not sure, in all the years of watching this and having seen these businesses, I hear the simultaneous announcements from the companies that coincide with a sigh or mumble from Paul. Your mum and dad were wrong on relationship advice and should pick another example, it turns out that there are not plenty fish in the sea.

In other more pressing news, MTN has released a trading statement in which they say that they expect to report a loss for the last financial year. Part the regulatory environment in Nigeria, the fine (which will have a negative impact of 474 cents per share) and part foreign exchange losses in a number of operations. The bad news does not stop there however, the list is longer than your arm and one gets the sense that the new management team will be met with a tired boat with the decks scrubbed clean. Also hanging over their heads is the more recent statements coming from the US in terms of hostility towards the Iranians. I am afraid that this trading statement, as it is not quantified, leaves us groping around in the dark. The one point worth making about this juncture in the company’s history is that they have attracted recently some incredible people. This may well be a horrible bottom, we continue to “watch it”.


 

The nerds of NASDAQ closed at an all time high last evening. NASDAQ stands for “National Association of Securities Dealers Automated Quotations”. Sounds like something out of the sixties. You would be right for thinking that, it was founded in 1971. It wasn’t that the NASDAQ was the first electronic trading system, it was the first electronic quote system. i.e. you didn’t need to go to the tape. What the NASDAQ did do was end the dominance of the brokerage houses in a way, by making sure that price discovery was easier to come by, i.e. the spread between the bids and offers narrowed significantly. I suppose in a way the NASDAQ is to settlement and markets as radar is and was to flying, you were no longer flying by the seat of your pants, in the same way, you were no longer trading blind.

Can you imagine what it was like when you went to the system that was based on electronic trading only, that must have been a pretty strange feeling to have the matching on the screens. I remember the days here locally with the old JET trading system when you could see the brokerage firm and the actual dealer on the screen, broker name and dealer code. In that way, you could actually call the firm’s trading desk up and match in the middle, with less liquid stocks. Nowadays it is clear that all is equal. Dark pools in the US seem to the anonymity.

Thanks to the pioneers of the electronic trading systems, we can all tee up on the same course as George Soros (to use golf as an analogy) and think we are going to dispatch the ball down the middle of the fairway right next to the green. A chip and a put in, hey, the expensive training courses and the adverts make trading look so easy! In reality, there are more losers than winners. As we often say around here, the people offering the day trading software and the courses, why don’t they do it themselves if they have the secret sauce? Perhaps everyone should try their hand at trading, to see how hard it actually is. Strangely, a lot of people do not know the difference between trading and investing, stock brokers and fund managers, sell side and buy side, the list goes on, no wonder people feel intimidated by it all. As one old timer once said to me, forget everything except that cash flows don’t lie.

Anyhows, quickly to markets across the seas vast and wide, the nerds of NASDAQ closed off their intraday highs, still printing an all time high of 5674, up nearly one-fifth of a percent on the session. The Dow industrial average closed by the same amount higher on the day, the broader market S&P 500 just managed to squeak a gain, energy stocks once again were laggards. If you are looking for someone good to follow in that regard (the oil markets), follow Javier Blas. And if you are wondering what the hashtag OOTT stands for – the Organization of Oil Trading Tweeters. Yes. Really.

Walt Disney reported numbers that were lower, as expected, and above analysts expectations. There was an announcement that Avatar and Star Wars themed parks would be opening relatively soon, Avatar in May this year, Star Wars sometime in 2019. Now you get to queue with nerds for days and not screaming kids! Sheldon and the gang must be thrilled. I must admit, I didn’t watch any of their movies growing up, perhaps as a function of living in places without “proper” TV. I really, really like the business, I have never been moved to invest in the stock, which does look perpetually expensive. The model is pretty amazing, three to four blockbusters a year, throngs of people at the parks and ESPN of course. Where it seems that the attrition of the subscriber base has bottomed. Somehow, you just have to watch sport live.

In sort of related news, as Hasbro actually sell Disney princess dolls, the company reported numbers comfortably above analyst estimates and soared (the stock price). Bright asked, what, Monopoly? I said yes, we still partake as a family, I honestly think that this is a magnificent way to teach kids not only winning and losing, rather about acquiring “stuff” and managing cashflows. Cards are also world class. So whilst some old school toys struggle to stay relevant, some old favorites turn up time and time again. Hasbro remember has assumed the licensing for Disney dolls. Beauty and the Beast I hear you say? Michael’s wife can’t wait, I do not blame her, the trailer looks incredible – Beauty and the Beast US Official Trailer. It turns out that an exact remake can continue to the franchise, from animation to “real”.

Another one of our stocks, Priceline, made an announcement yesterday – The Priceline Group Agrees to Acquire Momondo Group. The company acquired, Momondo, owns Cheapflights. This is a foray into European markets. The stock hardly budged, I suppose this is not big in the whole scheme of things. The company reports in just over a week from today, the market is obviously expecting good things, the stock is trading near the 52 week high.


 

Linkfest, lap it up

Not everyone can manage their finances. YOLO and all that, you know. What happens when it is Johnny Depp however and his financial affairs of the last 17 odd years are dragged into the open, as a result of him running into “difficulties”. In the court papers filed a week or so back, it is suggested that Johnny Depp Lives $2M-a-Month Lifestyle, Claim Ex-Managers in Lawsuit. Quite simply, the managers of his money had to lend him 5 million Dollars in 2012 (which he refuses to pay back) to fund an extravagant lifestyle. It does not matter who you are, and whether or not you can do the Futterwacken, spend less than you make is simple math. All the assets (you don’t see the debt) and wobbly to cover cash flows. I suppose Depp could sell some of the 70 collectible guitars and the 200 collectible works, and some of the 18 properties, those at least are assets.

I think that this is very significant for all deep level mining companies, an announcement from a drilling business – Master Drilling rolls out cutting-edge mining technology. The timing coincides with the mining Indaba in Cape Town, and you might well find that this is the biggest release of the day. Two things here, if the technique requires less support structure and less explosives, what does that mean for construction and explosives businesses? I would love to hear from geologists out there! Master Drilling is of course a listed business since 2012, since listing and all the talk of mechanization (and their good looking technology), the stock is up 85 percent plus. As the old adage goes, in times of the mining boom, it is the people who make picks and shovels (and beans) that make the money.

We have spoken about using cash regularly, especially since we are Visa shareholders and believe that The Cashless Society is the future. Jeff makes a good point here though, some business might be able to start charging less for cashless only transactions. No more, worrying about theft of cash, of the time wasted counting cash, the cost of transporting cash then then the cost of depositing cash.

Elon Musk Tweeted this last night, there is no doubt that the Model S is an amazing car – 2017 Tesla Model S P100D First Test: A new record – 0-60MPH in 2.28 seconds!. The article gives comparisons to the likes of Ferraris, Porsches and Lambos.


 

Home again, home again, jiggety-jog. Stocks across Asia are mixed, US futures are marginally higher. Markets have started mixed here!


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

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