Some days there is very little to talk about. Other days, like today, there are many topics to cover! First off, our president reappointed Lesetja Kganyago as governor of the SARB for another five-years. The SARB is a central institution to the South African economy, so having competent leadership is important. Lesetja Kganyago was awarded the honour of Central Banking Governor of the Year 2018, reinforcing that he is the correct man to lead the SARB for another five years.
Sticking with monetary policy, Jay Powell was before congress yesterday where he effectively confirmed a rate cut from the Fed at the end of July. Within minutes of his testimony hitting the web, the US Dollar weakened, gold soared and stocks shot higher. Yesterday is the first time that the S&P 500 broke through the 3 000 point mark. The index first broke through 2 000 in August 2014, so it has taken five years to gain an extra 50% which is good going. The financial blogger Ben Carlson, pointed out that since the bottom of the market in March 2009, the market is up 450%.
Over five years the return was 50% but over ten years the return is 450%! The starting point has been cherry-picked for maximum impact, but it does highlight how luck can play a role in your returns. Having the opportunity to invest at those low levels is luck, pulling the trigger is the skill. Heads down and let’s hit 4 000 in 2021.
Yesterday the JSE All-share closed up 1.11%, the S&P 500 closed up 0.45%, and the Nasdaq closed up 0.75%.
Our 10c Worth
One thing, from Paul
It’s been a while since I made this basic point, and illustrated it with a chart: over time markets go up, so you should get invested and stay in, for the long term. Keep that in mind when someone asks if the markets are “too high to buy”. They are probably going higher, because that’s what they do, in the long run.
The chart below from JP Morgan Asset Management shows the S&P Composite Index, in log scale. They must have cobbled together data prior to 1923, when the S&P Composite was introduced. Three years later it expanded to 90 stocks and then in 1957 it expanded to its current 500. Log scale means that the increments on the vertical y-axis are based on orders of magnitude, so the marks represent the previous mark multiplied by 10. That helps to keep the chart on one page, instead of being very tall.
Interestingly, the grey vertical bars at the back are the periods in which the US economy was in recession. It’s quite clear that recessions are becoming rarer and shorter. The global financial crisis of 2008 stands out on the right, but it’s been plain sailing since then.
As you can see, there have been difficult times, but if you were able to wait it out, positive gains returned. We are enjoying a good boom now. I wonder what this time will be called in decades to come?
One of our biggest draw cards to invest in MTN was their ability to sell on various services to their 220 million clients. Financial services in particular.
The announcement on Tuesday that they will be partnering with Sanlam sounds encouraging.
Many African countries are underinsured. MTN has exposure to these countries and Sanlam has the appetite to expand. Sanlam also has loads of experience at offering such services. It sounds like a very good fit.
The Fintech route is particularly exciting. MTN clients can access these services through their phones. No branches or sales people needed. We endorse!
Earlier this week, Richard Branson was on Bloomberg talking about plans to list his space company, Virgin Galactic – On its way to space, Virgin Galactic plans to make a pit stop on Wall Street.
There are a few companies vying to tap the space tourism market, including Musk’s SpaceX and Bezos’s Blue Origins. The technology to do it on a large scale is not there yet though, which is one of the reasons that Branson is listing his company. It will help him raise further funding to speed up R&D.
Maybe Uber should buy a stake in the firm? Imagine going for a ride to space on an Uber rocket, that you booked through an app and paid with your credit card? This is another great reason to be invested in the US market, there are so many choices when it comes to possible investments.
Elon Musks’ SpaceX is a company that he founded in 2002 with the intention to offer commercial space travel and services like satellite launches, space station supply flights, services as a contractor for the US governments’ scientific and national security missions.
According to the most recent round of funding which brought in $536 million at a price of $204 a share, SpaceX valuation has skyrocketed to $33.3 billion. SpaceX has raised over $1 billion this year as the company accelerates fundraising to develop its plan to beam high-speed internet to anywhere on Earth.
Yesterday, the company was awarded a $50 million contract by NASA to launch a satellite studying black holes with a scheduled date for takeoff being in 2021. This year the company has finished eight launches into space so far, with the most recent launch being on the 25th of June.
According to the company website, SpaceX has 36 space missions pending. The infographic below shows the number of completed missions by SpaceX, and it is good to note that the number of missions are increasing as the company gets better and better at space exploration technology.
I personally can’t wait for this company to come to the public markets so we can invest in it directly as it meets a lot of our investment criteria. The company is easy to understand, has favourable long-term prospects thanks to its dominant market position and differentiation and is run by honest and competent people. The only thing we would have to worry about is whether it trades at a fair price or not!
You will find more infographics at Statista
Linkfest, Lap it up
Another step is taken in finding ways to travel our galaxy – LightSail 2 sends its first signals back to Earth.
As more Chinese move into the middle class, more are travelling. The result is a growing need for airports – Beijing’s New Airport Is Completed, Opens September.
Vestact Out and About
Byron talks about the new MTN and Sanlam partnership – MTN, Sanlam insurtech partnership may face stumbling blocks.
The JSE All-share is lower this morning but the Rand is below $/R14.00 again! We commented in the office last night that both Facebook and Amazon have a ‘2’ in front of their share prices, bouncing back after both stocks had a big sell off last year. There is mining and manufacturing data for South Africa out today, and then CPI data out of the US this afternoon.
Sent to you by Team Vestact.
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