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To market to market to buy a fat pig. Wow, what a week! Aspen started on the back foot thanks to the Viceroy rumours, which then spread to the rest of the market. Basically, any stock that has been down over the last two days has been caught up in the Viceroy rumour mill. It seems like a surefire way to tank a stock price is to mention that company's name and Viceroy in the same sentence. Maybe we should start referring to Viceroy as, 'Them who must not be named'?
If you want proof that the market is not efficient all the time and that it is driven by emotion, this week's movements will be exhibit one. Thanks to the Steinhoff saga, the pain of a stock dropping by 90% is still fresh in most people's mind. Making the Aspen share price move understandable. It highlights why knowing your investment time horizon is essential. Being a long-term investor, you have time on your side. Time to sift through all the rumours to find the facts. Once you have the facts then you can decide if these new facts change the long-term outlook for your investment and act accordingly.
If Aspen highlighted the power of fear, Kodak highlights the power of greed over a share price. Kodak announced on Tuesday that they are getting into cryptocurrencies, pushing their share up from around $3 to about $12 in a day and a half of trading! They have created their own cryptocurrency which photographers can get paid in when their work is featured. Seems like a good idea. So groundbreaking to justify the stock price rising fourfold? Probably not!
Kodak also launched a new interesting product. No, it is not a new type of film or camera, it is a bitcoin mining rig. This $3,400 bitcoin-mining machine is a cornerstone of Kodak's crypto pivot, here it is below.
So there you have it folks, two short-term moves based on emotion. Time will tell if underlying fundamentals come to match the current expectations.
Market Scorecard. More record highs for US markets yesterday. With a lower tax rate, companies are instantly worth more, the market is in the process of deciding just how much more. The Dow was up by 0.81%, the S&P 500 was up 0.70%, the Nasdaq was up 0.81%, and the All-share was down 0.62%. Aspen rocketed higher by 10.7% yesterday, to be back at the level it was before 'Them who must not be named' were rumoured to be targeting them.
Linkfest, lap it up
Byron's Beats
I have always found that legendary investors have a great knack for explaining things that are complex. Making things that are complex seem simple. It is a fundamental trait as an investor because it keeps your clients informed and in touch. It also allows yourself, as the decision maker, to see a clearer picture of what is actually going on.
Names that come to mind include Warren Buffett and Howard Marks. A younger generation of investors/bloggers have also been very good at getting their message across. Josh Brown, Morgan Housel and Eddy Elfenbein are great guys to follow if you are interested in markets.
The tax cuts taking place in the US are fairly complex. But as a foreign investor in the US stock market, the most important issue to look at for us is the corporate tax rate. In his weekly summary, Eddy Elfenbein gives a very good explanation of how it impacts these companies and their shareholders.
- "I do, however, want to make a few comments about the change in corporate taxes and how it impacts investors. The tax law lowers the corporate rate from 35% to 21%. Effectively, what that means is that the U.S. government is a silent partner in every American business.
Previously, they had an odd relationship with the partners, because the government owned no part of the business, yet they were entitled to 35% of the final cash flow. All the other shareholders got the other 65%.
With this new law, the shareholders' stake rises from 65% to 79%. They get an extra 14% at no cost. Imagine if you had a silent partner who said to you, "here, take my 14% and you don't owe me anything." Of course, that's not literally what's happened. But effectively, it's pretty darn close.
This is a huge benefit for shareholders. It's almost like, overnight, you got 20% more shares of all your stocks. This is especially good for many of our Buy List stocks because they're very profitable. That's why they pay a lot of taxes."
Give that explanation around the braai tomorrow and look like a genius.
Michael's Musings
Ever wonder how long it would take a sport super star to make your annual salary? Well now you can find out - Sports Superstars Salary Calculator. The time it takes for them to have a good night's sleep, is all that is needed for them to make what most people make.
This is probably not only an American problem. If a procedure is covered by medical aid and there is a chance that the procedure will benefit the patient, then why not do it? - Why American doctors keep doing expensive procedures that don't work.
Vestact in the Media
Both Byron and Michael get a mention in this Business Report article - Aspen share price knocked by rumours of investigation target.
Byron chats to Fin24 about Steinhoff and their subsidiaries - 4 questions Steinhoff must answer.
Home again, home again, jiggety-jog. Good to see our All-share up on the open today. Later in the day, JP Morgan releases their FY numbers, and there is the release of US, retail and CPI numbers. Good luck to the Protea's this weekend!
Sent to you by Team Vestact.