History Forecasting

“From an investments point of view, we often talk about past markets, which is all very nice, it almost never tells us anything about the future. The one thing that we agreed on however was the following: History is important so that you can have modern day context. And in using the past, which defines the present, we can use these (learnings) to predict future trends.”


 

To market to market to buy a fat pig Those good old Eddy Elfenbein nuggets appear every Friday morning, this time he suggested that for the first time in a quarter of a decade (a generation – 25 years), all three major US indices closed with 5 consecutive all time highs. i.e. for five days in a row, the nerds of NASDAQ, the Dow Jones Industrial average and the broader market S&P 500 closed at a new record. Up and up. Optimism is still out there, and I think in large part it relates to a couple of factors, one being the loosening of regulatory overhang from the period post the financial crisis of 2008, the other being tax related reforms, which almost everyone agrees that the US needs badly.

The streak broke last night for all three indices, the Dow Jones snuck into the green at the close, up a smidgen by the end (up 0.04 percent), whilst the broader market S&P and the nerds of NASDAQ clocked lower closing values, down just under one-tenth of a percent. Snap, the company that owns Snapchat, is getting ready to be the biggest tech listing for a number of years, since Alibaba. There is no doubt going to be a lot of excitement, the company is being valued near the bottom end of the range. Still, as Michael said to me yesterday, Snap have rebuffed big prices that would have made the founders wildly rich, the rewards will now be on paper for all to see. Whether or not the company can retain and grow the subscriber base, and more importantly revenues, that remains to be seen.

I may be proven completely wrong on Snap, surely the audience you target time and time again must have some money, or are you just looking for a larger slice of their money? Bright and I will disagree on this one, of course he is inside of the target market for Snap/Snapchat and I am not. I can’t see how everyone would find my day useful, even if my “channel” was only available for a few days. I do not really have the time to do all of these updates either. It becomes a habit thing, like reading tweets and Facebook postings. I am a bad friend on facebook, I wish you happy birthday and that is about it. Bad Sasha. On Instagram, I am more likely to be friendly, I love pictures and celebrations and that sort of thing. See the WSJ article – Snapchat Parent Snap Inc. Sets Valuation at $19.5 Billion to $22.2 Billion as IPO Approaches.


 

Back home where the wind grows strong as tropical storm Dineo pounds the Southern coast of Mozambique and delivers a lot of rain to Mpumulanga and Limpopo (and Gauteng early next week). The winds and rains have a devastating impact on the low lying areas, most notably the poor people are impacted. There is nothing that you can do about the weather, there is a lot that you can do about making sure that people have proper structures.

Stocks rose modestly here, up just shy of one-fifth of a percent. Financials, fine pending of some sort notwithstanding, rose two-fifths of a percent, ahead of the rest of the market. Resources sagged somewhat, perhaps the pickup in inflation in the US and the fact that rates are going to be hiked is Dollar positive and commodity price negative. Naspers was the leader, up over two percent. It could be related to a competitor that had results yesterday, the NeatEase ADR rose sharply, up 14 percent by the close. Good results pushed the ADR price to record levels, Tencent may be a rival of this business, it still seems to be a growth area for all businesses.

At the bottom end of the spectrum there were results for Woolies which were not favourably received by the market, we will revert with a detailed write up. This is for us a quality outfit operating in an iffy economy. Quality trumps everything else in the end, the management and the product offering are tops. Aspen was also a big loser on the day, I cannot see too much out there, I did see that the Spanish authorities had opened a case against the group and two other operators on that country, I also saw that Zacks had downgraded the company to a hold from a buy. The next set of news is a trading statement, expect that in a week or two is my best guess (from past releases), half year results will be out in March. Until then ….

Lastly, if you are struggling to understand the currency collusion, then be sure to read this fine piece – Competition Commission probe into banks’ currency trading.


 

An interesting story that my dad was sharing with me about his dad, and I am sure that he won’t mind me sharing. My grandfather was a great collector of things to write about, and even though English was his third language (Russian first and then French), he had a great way with languages. My Grandfather asked a San (Basarwa) fellow once how old he was, a fellow by the name of Xameb, to which he replied (written in my Grandfathers journal): “I am as old as my disappointments and as young as my naughtiest thoughts.” I quite like that. We (my father and I) got onto talking about history, a subject which we both enjoy a lot.

From an investments point of view, we often talk about past markets, which is all very nice, it almost never tells us anything about the future. The one thing that we agreed on however was the following: History is important so that you can have modern day context. And in using the past, which defines the present, we can use these (learnings) to predict future trends. For investing, that is pretty important, being able to be a little early. Not like the dotcom early, just a little early, 6 to 18 months. For instance, and here is a generous example, Tesla. The combustion engine, that has not changed much since it was thought out, and has been refined to the nth degree, we can all agree on that. What happens however when the original design for transportation was not the correct one, and that is what Tesla is trying to change. See below in the links on Tesla and Elon Musk’s ventures. Is Musk early? More and more evidence tells us no, electric and driverless cars have certainly taken hold.

I do not for a second buy the fact that we go backwards, almost never does humanity fall into a deep dark pit. If you are feeling that this is the case, then fear not, take the time and the effort to read the Gates foundation letters over the weekend, you can thank me later – Warren Buffett’s Best Investment. This is the 2017 annual letter, and it also coincides with the ten year anniversary pledge of Warren Buffett to give his “efforts” to two people (friends of his) who have a genuine appreciation in changing humanity for the better. And the successes that they have made. Included in the releases after the recent passing of Hans Rosling is a great tribute from Bill and Melinda – Our Memories of Hans Rosling.

Perhaps we should all be more like Xameb – “I am as old as my disappointments and as young as my naughtiest thoughts.”


 

Linkfest, lap it up

Two fabulous articles from Bloomberg, the first one is a need for robotics in nuclear cleanupsOne Job the Robots Can Have: Cleaning Nuclear Waste. The machine is not cheap, 500 thousand Pounds, around the size of a coffee table. I expect more and more robots filling the roles of dangerous and hazardous human occupations. A warning for nuclear energy pundits – “Even if every nuclear power plant in the world were shut down tomorrow, it would take a century or more to deal with the waste … “

And then the headline story from Bloomberg Business week – Elon Musk Is Really Boring. Really? Boring as in tunnelling, the fellow falls into the category of doer, and not just hot windbag.

It amazes me the direction that technology is goingIBM researchers have created an “impossible” molecule that could power quantum computers.

“Apart from carrying a negative charge, electrons can spin in either clockwise or anti-clockwise direction – and these spins can be manipulated. This practice has given rise to an emerging field of “spintronics,” where like the sequence of 0s and 1s govern the behaviour of electronics, information can also be stored in the spins of electrons.”

 


 

Home again, home again, jiggety-jog. It is a US holiday on Monday, to celebrate the birthday of George Washington, the third Monday in February. We should do that, have certain holidays attached to the weekend, rather than midweek.


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

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