It’s all Politics

“Quite. There are ruling party elections later this year. There are multiple European elections this year, some concluding soon, the Netherlands and France, Germany towards the end of the year. US policy changes, regulatory rewinds (Obamacare) and tax reforms could all bode well, or badly for global equity markets, depending on the way that you view it. We shall see.”


 

To market to market to buy a fat pig It was a strong showing on the local equity markets on Friday, stocks as a collective added nearly three-quarters of a percent, the strongest sector being industrial stocks, as a collective those were up one and one-quarter of a percent. Moving the needle in the positive direction was Kumba, a stunning 6 percent plus move on the day, to add to all the other wild moves recently. If you managed to get a volatility contract in Kumba, let me know, ok? I suspect that many would be loathe to write such a tricky contract. Vodacom, Naspers, Woolies and Discovery all advanced more than two percent, in the losing column were some property of the UK kind, Hammerson and Intu. Aspen and Bidcorp also lost some ground.

It was of course jobs day in the US, we will talk about that in a bit. That did spur the local market on. There were some results from RMB Holdings for their six months to end December, the business will be listed for 25 years at the end of this year, that is one quarter of a century. The company is essentially a holding business for FirstRand and has a small property and a private equity business. For the most part, as a 34 percent holder of FirstRand, this is the vehicle chosen by the founders to dictate control over the financial services empire. The outlook segment for such a big beast is perhaps too simplistic, easier to understand than the unknown-unknowns of Rumsfeldian proportions:

“Based on the FirstRand outlook and current macroeconomic conditions, the group expects economic growth to pick up in the second half of the year. Global and local political uncertainty imposes downside risk.”

 

Quite. There are ruling party elections later this year. There are multiple European elections this year, some concluding soon, the Netherlands and France, Germany towards the end of the year. US policy changes, regulatory rewinds (Obamacare) and tax reforms could all bode well, or badly for global equity markets, depending on the way that you view it. We shall see.

Another business that released a SENS out of the blue, Tongaat suggested that they would see sugar production “grow significantly over the next two years, in the recovery from drought conditions of the past two years.” The stock popped nearly four percent on the news. Over ten years however, the stock is up only ten percent.


 

It was jobs time Friday, the first full month of the Trump administration. Was it going to be YUGE, and tremendous or just inline with the market expansionary theme that has played out over the last 18 months or so. Of course much of the anxiety stemming back from the second half of 2015 has been around the Fed rates cycle, ever since the taper tantrum, coupled with a commodity price slide of epic proportions. Inflation is non-existent. Labour market, seems to be strong, and the theme continues. The only two issues are a lack of wage growth and the participation rate, i.e. people earnings more on a hourly basis and the number of working age folks in the labour force, bearing in mind that people study and they are not always fully employed. Or employable, they may lack the skills needed in the current economy. Not everyone knows how to Snap, or ‘Gram, you know!

The official release is known as the Employment Situation, and is normally released on the first Friday of the month. Unless, as was the case this last time around, the Friday fell too close to the end of the month prior. The number beat expectations, by around 35 thousand, there was one commentator on CNBC that guesstimated correctly, well done everyone for guessing, sticking your neck out there, and then not worrying what the revised number was relative to the report.

It sure is a volatile read. I suspect, armed with this knowledge, the Fed will proceed at their next interest rate meeting (the Federal Open Market Committee as they are known), that takes place this week, concluding on the ides of March. Beware my friends, beware the ides of March. The reason why there has been little reaction is, as the this Bloomberg article points out, alignment for once – Fed, Economists and Investors Show Rare Harmony on Rate Outlook.

The upshot of it all was a stronger market to begin with, that saw a rally fizzle around midday, only to end back up where stocks started. The broader market S&P 500 added one-third of a percent by the close, the nerds of NASDAQ added nearly four-tenths of a percent by the end and the Dow Jones added just over one-fifth by the closing bell. All the major sectors were in the green by the time the day sounded “clang”, representing a broad based rally of sorts. Snap fell over two percent. I am guessing that the stock will continue to be volatile, earnings will be the only thing that ultimately matters here in the end -> Snap’s ‘Long-Term’ Investment Value & Share Structure Seriously Questioned.

Down here in the Southern Hemisphere, only 10 percent of the global population live. As such, our winter and summer changes are less exciting than the ones north of the equator. Today the US “starts” an hour earlier. As the New Yorker magazine points out, in this article titled Can we fix daylight-saving time for good?: “Scientists have found that, on the Monday after daylight saving starts, heart attacks and traffic accidents are more numerous, judges dole out harsher sentences, and employees are more likely to “cyberloaf” on the Internet. After daylight saving ends, making sunset earlier, street crimes are more common, as are traffic accidents involving wildlife, because that’s the peak migration time for deer and elk.”

The only good thing for us is that markets start one hour earlier. i.e. The US markets open an hour earlier in our day, we get to “have direction” from the US markets. 15:30 local Jozi time.


 

Linkfest, lap it up

You have definitely heard of the raging bull bronze statue, that clocks in at just over three thousand kilograms. Less known, and one is not to blame for a “lack of knowledge”, is the “Fearless Girl” statue, that is a little over 113 kilograms, or a well built scrum half of the modern era. It may, or may not be a permanent sculpture. I suppose it is easier to “move”, being smaller. What it stands for however is very powerful, see this AP piece via CNBC – Behind NYC’s ‘Fearless Girl’ statue are 2 corporate giants. I hope it stays.

This comes via the weekend Abnormal Returns email. My physiotherapist (for a recent ankle injury, courtesy long distance running) told me this, short bursts would increase your fitness markedly. The New Scientist has an interesting article – Best anti-ageing exercise is high intensity interval training. HIIT (high intensity interval training) is the new acronym, OK? Stay young, exercise in short bursts. We continue to think that businesses like Discovery, Cerner will benefit from changing behaviour, whilst Nike and Under Armour (and their competitors) will all benefit from a change in humanity, i.e. more exercising in free time.

Talking about free time and your Wi-fi connection, this Bloomberg article makes some interesting observations about how cheap data means people no longer look for “free” Wi-fi – A World Without Wi-Fi Looks Possible as Unlimited Plans Rise. Seems like it was going the other way, until the mobile providers hit back.

The competition for your eye balls is heating up. It is all about content and sport is a huge player in content creation – Facebook in Soccer Streaming Deal With MLS, Univision. Interesting to note that the article points out that Facebook will have access to different camera angles. I think the future of sport broadcasting is where the viewer has more control over what angles they want to watch the matches from.

There is no doubt that the more education you have the more you earn. One of the graphs in the following research paper – Fourteen Economic Facts on Education and Economic Opportunity, even shows that since 1980 if you didn’t have tertiary education, your earnings have gone backwards. The research also shows that early stage development has a huge impact on where you end up later in life.

I personally would not put my money in Bitcoin, it is a commodity that swings on sentiment, unlike a stock that has management growing earnings for shareholders – Why Bitcoin lost 15 percent of its value in a few minutes.


 

Home again, home again, jiggety-jog. Good thing, daylight savings ends in the US. In the UK and Europe it is two weeks time. As for us, no daylight savings of any sort.


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

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