Sign up for our free daily newsletter
Get the latest news and some fun stuff
in your inbox every day
To market to market to buy a fat pig. Welcome to 2018! I was one of the few to remain in 'Joburg' during the festive season. What a great place! You might have to replace an ocean with your pool and 'the mountain' with the Melville Koppies, but it is the few weeks a year where Gauteng's pace slows to a stroll. Not to mention the perfect weather; hot, no wind and the odd afternoon thundershower.
I think 2017 will go down as the year of the crypto-currency. Many people have made bucket loads of money backing this new disruptor technology. Bright shared something on the Vestact WhatsApp group, the article estimated the Ripple founder was worth $54 billion after that particular crypto went from $0.24 to $3.80 in the space of six weeks. Ripple is a crypto that is trying to replace the archaic SWIFT system used for international payments.
Talking of currency, more significant to us in Mzanzi is the Rand, currently around $/R12.40. Having a look at a five-year graph, we were briefly at these $/R12.50 levels at the start of 2017. It was the second half of 2015 where we last spent a significant period at these level's though, then 'Nene-gate' happened, and we very quickly got to the $/R16.50's level. I think there is little doubt that the market is expecting Cyril Ramaphosa to change the status quo. About an hour before it was officially announced that he had been elected as the new ANC president, the Rand strengthened significantly.
Globally, there have been many heads of state voted in, on a mandate of change. We have seen that change is slow and changing the status quo is difficult. Think of how much Trump has tried to change, for better or worse, and the frustration he has had. Take into consideration that the Republicans control both the House and the Senate. I'm currently reading Michael Lewis's new book The Undoing Project: A Friendship that Changed the World, where he goes into some of the traps we fall into when making forecasts and decisions. Arguably the biggest forecasting mistake that we make is the problem of recency bias, where we tend to assign a higher probability to things that happened recently. In this case, the small change of electing Cyril Ramaphosa, has been extrapolated to mean large change in the next 12 - 24 months. Forecasting politics is a fool's errand though, so we will just have to wait and see what comes to fruition.
Market Scorecard. Bloomberg tells me that the first trading week has been the best for markets since 1999. The Nasdaq and S&P 500 are both at record highs, the Dow is a smidgen off of its record high. Locally, after a 0.5% move higher yesterday we are back in the 60 000's for the All Share.
Linkfest, lap it up
Byron's Beats
December and January are good months to read thought-provoking articles either reflecting on the year that was or looking at the year that will be. The ones that look at the year ahead should be taken with a pinch of salt because let's be honest, no one really knows what will happen in the year to come. I prefer the philosophical ones as apposed to articles that try and forecast. In fact, my favourite piece from January last year was the one from Howard Marks which emphasised that you should ignore forecasts. I couldn't agree more.
My favourite piece over this last period was by Morgan Housel from The Collaborative Fund titled The Greatest Story Ever Told. It talks about how belief in something is the first ingredient to achieving success. Confidence is key.
A good example of this is Tesla. Even though the share price overvalues the current business based on its profits, it is the belief that the market has in Elon Musk that will push the success and give him access to the needed capital to fulfil that dream.
Bitcoin is another good example, the amount of research and attention it is receiving because of the belief in its potential will result in blockchain technology attracting super bright minds and funds which will make the dream of alternate currencies a reality.
This mindset can be applied to all of capitalism's great successes. It encourages belief and incentivises actions.
Consider this mindset with regards to our current situation in South Africa. Cyril's victory immediately resulted in a stronger currency which could allow our central banks to cut rates. Confidence is the cheapest form of stimulus. It will undoubtedly be a long road ahead but the belief and optimism for change is there, and that is a good start already.
Michael's Musings
When it comes to Apple the company, all people talk about are how iPhone sales are doing. Apple's eco-system is growing into a giant in the background - Apple app developers brought in more sales than McDonald's in 2017.
Only a week into 2018, the number one question I have had goes along the lines of: 'With stock markets at record highs, can they go higher in 2018?'. There are many answers to that question but the fact that dividend payouts are also at record highs tells you that the underlying fundamentals are there to justify the current prices - A record amount was spent on S&P500 dividends over 2017, and 2018 could break that record.
As a Naspers and Tencent shareholder take note. The below image shows how integrated WeChat is in daily Chinese life - China's Digital Wallets Offer a Glimpse at the Future of Payments.
Home again, home again, jiggety-jog. The market is off to a green start this morning, Tech stocks globally had a good day yesterday so I am expecting an up day for Naspers. Local data out today, there is a business confidence read and then later total vehicle sales for December.
Sent to you by Team Vestact.