Pravin or Out?

“There is very little sensiblity about the “recall” of the finance minister and the deputy finance minister yesterday, most especially from a road trip to sell the country. Surely it could have been done later in the week?”


 

To market to market to buy a fat pig Hmmmm ….. There is very little sensiblity about the “recall” of the finance minister and the deputy finance minister yesterday, most especially from a road trip to sell the country. Surely it could have been done later in the week? Mr. Market reacted in the way that it knows best, sell first and then ask questions later. The Rand had, to the US Dollar, reached the best level since the middle of 2015 before the news filtered through that el Presidente issued a statement just before midday.

By then the news was already in the market, the Rand weakened from around 12.31 to the US Dollar to around 13.00 this morning, that is nearly six percent weaker over 24 hours. The upshot of it all was a firmer Rand hedge complex. How badly timed was the message yesterday? Ha-ha. Although, it depends where you draw the line in the sand. Over a couple of months the Rand is still around 7 percent stronger to the US Dollar. Five years ago, the Rand was at 7.70 to the US Dollar. 10 years ago, the Rand was at 7.30 to the US Dollar.

Bloomberg is reporting this morning that President Zuma has told the communist party that he is going to fire Minister Gordhan. The Rand is falling hard. This ironically may support the top end of the market, the Rand hedge element. Banks and financials. Expect those to sell off heavily. Until we actually see something concrete, which may well emerge today, fasten your seat belts sports lovers.

Suddenly with the prospects of instability (perceived and real) in Treasury, call it what ever you want, means that the prospects of downgrades are real again. And that is bad for banks and financials, banks as a collective down 3 percent. FirstRand gave up three and a half percent, RMB Holdings about the same, Barclays down three and one-fifth, Standard Bank down over three percent. Those were the stocks that were deep in the red, Kumba at the top of that list (down over 4 percent) as Iron Ore prices sunk in the Chinese session earlier in the day Monday.

At the opposite end of that list were the Rand hedges, Mediclinic added over three and a half percent, AngloGold Ashanti and Amplats right at the top, benefitting from stronger precious metal prices. Which in turn were benefitting from the “uncertainty” of what next with Trump policy implementation, the healthcare misstep has somewhat rattled Mr. Market. Dollar down, precious metal prices up, industrial metals down (what infrastructure build?), the Rand had external factors at work. By the time all was said and down, stocks in Jozi were down only one-fifth of a percent. SA inc. stocks bearing the brunt of policy fumbling. What instrument did Nero play whilst Rome burnt? Not the fiddle, it hadn’t been invented yet.

What can you as an individual investor do about these policy issues and political meddling? First and foremost, politicians and policies come and go with the waxing and waning of democracy. It is also worth noting that South Africa has only had democracy for 23 years. And only one ruling party. With only one economic policy that is still trying to find the middle road. Many still live in abject poverty and it is a tragedy. Until something gives, expect more of the same. We have democracy, which is better than most other places, the institutions work.

The other thing you can do as an investor is externalise funds in hard currency. We follow offshore and invest in offshore stocks just as much as we do in SA. If you are interested, email us. Investing offshore for the sake of externalising money is not a good enough reason to “do it”. When externalising money, you have to be VERY sure that you are owning the very best investment opportunities, and not just sending money offshore.

The US market is the best place to start, the uninterrupted 250 year model of capital creation and wealth creation is unparalleled and as of yet to be replicated anywhere in the world. Whilst many other emerging markets may be interesting (India, Vietnam and of course China), there is a lot to be said for owning stocks in an environment that is well regulated and that respects the role that capital plays in society. Plus most of these businesses operate within those developing growth frontiers. Capitalism is still the single best method for upliftment of society. If in doubt, think North and South Korea.


 

Stocks across in New York, New York, finished the session in a far better place than where they started, the “Trump unwind” did not last too long. That said, the Dow Jones Industrial Average has had eight losing sessions, the worst in around half a decade. That said, the one month return for blue chips is only minus 1.37 percent, hardly a sorry state of affairs. At the end of the trading session the Dow Jones had given up just over one-fifth of a percent. The broader market S&P 500 lost one-tenth of a percent, whilst the nerds of NASDAQ rallied over one-fifth of a percent to close up shop nearly a percent and a half stronger from the worst point in the day.


 

Linkfest, lap it up

Cyborgs? Chips in your brain? Science fiction? Not really, check out this new venture – Elon Musk launches Neuralink, a venture to merge the human brain with AI

On the bucket list for sure, seeing the Aurora! How about a plane ride there? It exists, and costs a lot. Around 1400 US Dollars each person (you have to be in pairs) gets you to see the lights on a seven and a half hour flight from Dunedin, New Zealand, towards the South Pole . Business class? 3000 Dollars apiece. Amazing – Flying Through Auroras: Airline Carries Passengers into Southern Lights

It seems the power of pizza is real in the stock market tooForget Tech Stocks! You Should Have Invested in Pizza. Looking at the returns on the graph, I wouldn’t complain with any of those returns.

Infographic: Forget Tech Stocks! You Should Have Invested in Pizza | Statista You will find more statistics at Statista

Paul found this great article over the weekend. The Nike share price has underperformed as of late but I would say that the market is undervaluing the huge potential that is coming out of the Chinese market’s move to fitness – Here’s what happens to the athletic wear industry when China starts going to the gym


 

Home again, home again, jiggety-jog. Goodbye Ahmed Kathrada. Goodbye Pravin Gordhan? We shall see, there will be segments of the market that are sold off heavily and that are bought heavily.


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

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