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Market Scorecard
The local CPI number that was released yesterday came in at 4.6%, lower than the 4.8% expected. It won't come as a surprise that fuel was the main driver, increasing by 16.3% over the last year. The good news is that 'Breads and Cereals' continues to drop and 'Telecommunication Devices' dropped by 16.1%. I suspect that the MPC rate decision later today will be a 'hold'. The number that we want to focus on later today is the SARB's medium-term forecast for inflation; it will give you an idea of the interest rate path for the rest of the year.
The race for a $1 trillion market cap is heating up, with Amazon crossing the $900 billion mark yesterday. Now only $35 billion (3.8%) behind Apple. Coming into this year I was sure that Apple would get there first, with a comfortable lead. This year though the stock is only up 10%. Amazon though is up 55%, adding $380 billion in value over 7-months alone! Who will win the race? Does Alphabet still have a shot with its current $837 billion market cap? Only time will tell.
Sticking with Alphabet, its Google division was handed a $5 billion fine yesterday for anti-competitive behaviour. The company is appealing the decision, which will probably end up in a lower penalty, but what I am reading is that they will end up paying something. I find it rather ridiculous that they are being fined over an operating system that they give away for free! Yes free! They make their money back by having their apps pre-loaded (which can be deleted by the user) on the device, which means they get user traffic and advertising revenue.
The ruling is basically saying that having those preinstalled apps is anti-competitive, and they need to let the consumer decide which apps to install. Google doesn't develop and then hand out Android for free, just because they are nice guys. They are there to make money, and if they can't make that money back through the preinstalled apps then they will make their money elsewhere; Google warns Android might not remain free because of EU decision. Their 2Q results come out on Monday, we will cover this fine and their results in more detail next week.
Yesterday the JSE All-share closed up 0.22%, the S&P 500 closed up 0.22%, and the Nasdaq closed down 0.01%.
Our 10c Worth
One thing, from Paul
My eyebrows were raised by a report yesterday that Anglo American Platinum and the Public Investment Corporation (PIC) will each invest $100 million into venture capital funds which will search for alternative applications for platinum group metals (PGMs). They will invest in innovative companies looking at hydrogen infrastructure, fuel-cell electric mobility, energy storage platforms, and water treatment solutions.
The main current application of PGMs is in catalytic converters in the exhaust systems of petrol and diesel engines. That is threatened by the move away from internal combustion engines to electric vehicles. Maybe that is why PGM prices are so weak? It's a serious concern for the industry, and one of the reasons that we avoid investing in the PGM miners. Progress takes no prisoners.
All this reminds me of a fabulous newspaper clip which I saw online. It's from The Washington Post of 14 May 1900. It argues that horses are much more reliable than automobiles, and includes this memorable line:
- Local horse dealers do not look upon the advent of the automobile with any degree of seriousness. It is true that society has taken up the automobile, but the dealers consider it nothing but a fad.
More on the PGM VC funds here, on the excellent MiningMx website.
Byron's Beats
Sometimes I feel the technological innovations in healthcare are overlooked. All the focus seems to be on the likes of software, mobile phones, wearable devices, self-driving cars, gaming, drones etc. Maybe it is because healthcare is complex and difficult to understand for the layman?
Stryker, one of our recommended stocks in the US, has recently opened a robotic surgery training centre in Fort Lauderdale. The facility will train over 100 surgeons this year as well as plenty of Stryker support staff.
Much of the focus will be on performing joint replacements with robotic assistance. The Stryker Mako is the primary robotic device they will be focusing on. This device enables surgeons to have a more predictable surgical experience when performing joint replacements.
Once the surgeons are trained with this product they will be entrenched in using it. They will then insist that the hospitals they operate from purchase the product. Seems like a good strategy to me!
Michael's Musings
Now that the financial crisis is a distant memory, and most global economies are back on a growth path, the topic of middle-income wages is hot again. Especially given that inflation is ticking up. This article from human progress shows how globalisation and technology have brought down the cost of everyday items though, which has made our incomes go further - U.S. Cost of Living and Wage Stagnation, 1979-2015.
- "In October 1979, average hourly earnings stood at $6.51 or $21.20 in 2015 dollars. In October 2015, average hourly earnings stood at $21.18 - slightly below the inflation adjusted 1979 level. Looking at the average hourly earnings, however, ignores at least three very important factors: expansion of non-wage benefits, fall in the price of consumer goods and rise in price of services, such as education and healthcare."
Bright's Banter
Forbes came out with their ranking for the highest-paid celebrities in 2018, even though 2018 isn't over yet. Floyd Mayweather tops the list, thanks to his fight with Conor McGregor last year. The sad story here is that it seems Conor McGregor has not been paid his portion for the same fight, but we digress.
The interesting entries here are of course George Clooney and Kylie Jenner coming second and third respectively. I say interesting because these weren't earnings from their line of work but from the businesses they created. Clooney and his friends were busy building vacation homes in Cabo San Lucas, and spending a lot of time drinking tequila in Mexico, then boom! Casamigos (house-friends) was born. Fast-forward a few months, and they sell the business to Diageo for as much as $1 billion. This sale helped boost Clooney's earnings to $239 million, making him the second spot on the list.
Kylie Jenner comes in at third place with $166.5 million in earnings and this is thanks to her hard work building Kylie Cosmetics on SnapChat. Kylie Cosmetics is a business that specialises in an array of lip kit (lipstick & lip liner) and recently added 30 new products including make-up. This caters for the younger people who aren't afraid to explore with their make-up. According to Forbes, Kylie is now one of the youngest, richest self-made women in America.
Below is the top 10.
You will find more infographics at Statista
Linkfest, Lap it Up
As long as people want to lose weight, they will be buying Nike shoes, pants and shirts. I don't see the below statistic changing anytime soon.
Earlier this week Chinese GDP came in at 6.7%, slightly lower than 6.8% in the previous quarter. Slower growth on a bigger base still means massive growth! The below graph shows how things on the ground are still expanding at a good click.
Watching Mbappe, at the age of 19 dominate the football world, it makes one feel old. Worry not though, this graph from the Business Insider shows what milestones still lie ahead for you - Here are the ages you peak at everything throughout life
Vestact Out and About
Signing off
It is a red day on the local markets this morning. Around mid-morning there is the UK retail sales and then the MPC rate decision will probably be announced around 15:15. To finish off on data released today, there are US initial jobless claims and manufacturing data.
Sent to you by Team Vestact.