Why Diversify


Market Scorecard

After the initial shock from Trump’s anti-trade talk on Monday evening, the markets recovered as the day went on to finish the session in the green. Most books on negotiating say that your first offer needs to be a low one, and then work from there. Remember Trump and Xi are meeting on Friday to talk about trade. Trump’s comments on Monday were probably his opening bid. Time will tell.

Yesterday the JSE All-share closed down 0.65%, the S&P 500 closed up 0.33%, and the Nasdaq closed up 0.01%.

Our 10c Worth


One thing, from Paul

Benedict Evans is an influential technology investor. He is a partner at a16z (Andreessen Horowitz) on Sand Hill Road in Menlo Park, California. He writes about consumer technology, ecosystems and mobile platforms on his blog and on Twitter. Read more about him here here.

He gave a very illuminating presentation at a16z’s annual tech conference last week. He makes the point that the access story (to the internet) is near the end, but the usage story (e-commerce) is just beginning. E-commerce is still only a small fraction of retail spending in the US, currently less than the amount spent at gas (petrol) stations.

Some industries like home entertainment, toys, electronics and books are already transformed. Massive areas of consumer spending like clothing, groceries and restaurant meals are being disrupted by new online ordering and home delivery models. Advertising all these products has largely shifted online, and onto social media sites in particular. The opportunity is massive. Global retail is $25 trillion dollars, and total consumer spending is an even larger number.

The investment takeaway is clear. Own Amazon, Visa, Facebook, Booking.com, Netflix and in Rand-based portfolios, own Naspers.

Evans’ full talk with slides is available here as a 23 minute video.


Byron’s Beats

The recent market volatility has been a stark reminder of why it is important to diversify. Shares like Johnson & Johnson, Visa, Amgen, Stryker, JP Morgan and Starbucks have been very resilient during this recent pullback. One of the core reasons we really like these shares is because they are stable, consistent and have solid fundamentals.

Very often investor instinct is to follow the momentum. Especially for existing clients who have held and watched stocks like Amazon, Nvidia, Netflix and Facebook surge ahead. Despite these stocks already having big allocations in their accounts, many clients would prefer to add to a high flying Amazon versus a boring Jonson & Johnson. Over the last 6-months JNJ is up 19% and Amazon is down 1.6%.


Michael’s Musings

On Monday, the new National Minimum Wage Act was signed into law (National Minimum Wage a step towards reducing inequality – Presidency).

It is always tricky when putting floors on what people can earn. In pure economics, unemployment is caused because wages can’t drop low enough to absorb all the people looking for a job. In the real world, it is more complicated than that.

Even at the current R3 500 per month minimum, people will struggle to live, let alone get themselves out of poverty, and break the poverty cycle. At one end we need to avoid over-regulation, at the other end unions are saying the minimums are not high enough. The only way to avoid this argument is to have an education system the produces people who are useful to the economy.


Bright’s Banter

Google employees were protesting again yesterday, calling for the scrapping of Project Dragonfly. Project Dragonfly is the censored search-engine Google is building for China.

The Intercept reported that Google employees in the UK, US, Canada, Spain, Germany, the Netherlands, Australia, and even in Hong Kong were protesting outside their offices demanding change.

Here are some of their concerns, and to be fair they’re valid:

“Our opposition to Dragonfly is not about China: we object to technologies that aid the powerful in pressing the vulnerable, wherever they may be.”

“Many of us accepted employment at Google. . .understanding that Google was a company willing to place its values above its profits,” wrote the group, known as Google Employees Against Dragonfly. “After a year of disappointments including Project Maven, Dragonfly, and Google’s support for abusers, we no longer believe this is the case.”

This comes after a protest/walk out at Alphabet’s offices about sexual harassment and the $90 million exit package given to former Android CEO Andy Rubin who was accused of “inappropriate” conduct.

Linkfest, Lap it up

Great to see tourism surging in the Cape again. The one benefit to come out of the drought is that the city is vastly improved on the ‘water-wise’ scale – After the drought, Cape Town’s film industry is booming again

As an Aspen shareholder this is great to see – South Africa’s Aspen launches three-in-one HIV drug

We are a step closer to stepping on Mars – Watch NASA scientists freak out after landing a probe on Mars for the first time in 6 years

Infographic: Mars: Man's Enduring Curiosity | Statista You will find more infographics at Statista

Vestact Out and About

Bright was on Business Day TV last night talking stocks – Stock Watch Picks – 27 Nov 2018.

Signing off

Our market has another green start to the day, hopefully we won’t close in the red like yesterday. Naspers is up 4% this morning, closing in on that R3 000 mark. Looking ahead, there is South African consumer confidence out today and then US GDP data.

Sent to you by Team Vestact.

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