Sign up for our free daily newsletter
Get the latest news and some fun stuff
in your inbox every day
Market Scorecard
South African equity markets have had a tough start to this week. Financial and banking stocks are leading the slide in share prices. On Friday S&P changed their outlook on South African debt from stable to negative, meaning that if things don't change they will move South African debt to two notches below junk. If one rating agency is moving to drop us to two places below junk, it seems a foregone conclusion that the other agency, Moody's, will be dropping us to junk status next year.
A drop in our debt ratings will probably hit our financial institutions the hardest, partly because their debt will be downgraded to junk status too. It is a policy that the banks of a country can't have a debt rating higher than that of the country. A sign that international investors are preparing for a downgrade is that this week has seen some of the biggest outflows of the year from South African bonds. It is worth noting that in the global climate of very low interest rates, South African debt is still attractive to some higher risk investors. Junk status does not mean all is lost. Some positivity to take out of the current situation is that the Rand has held up well since the S&P's announcement on Friday.
Yesterday the JSE All-share closed down 1.22%, the S&P 500 closed up 0.22%, and the Nasdaq closed up 0.18%.
Our 10c Worth
One thing, from Paul
Genetic testing is a growth industry and we are invested in it via Illumina, which makes the sequencing machines. People want their DNA analysed to determine their ancestry, and to see if they are genetically pre-disposed to certain illnesses like Alzheimer's. The global market for direct-to-consumer DNA testing is predicted to triple over the next six years.
This interesting article reviews the experience of a journalist who submitted DNA samples to leading US company 23andMe, and simultaneously to Chinese upstart Chengdu 23Mofang Biotechnology Co. (that 23 in the name was not a mistake, it's a copy).
23andMe was co-founded by Anne Wojcicki, a Wall Street biotech analyst once married to Google co-founder Sergey Brin. The Mountain View, California-based firm has more than 10 million customers and has collected 1 billion genetic data points, according to its website. By contrast, 23Mofang is run out of the Chinese city of Chengdu, and the founder Zhou, 36, is a computer science graduate. They expect to have 700 000 customers by the end of this year.
The results of the test showed some differences, especially in the disease prediction section. The Chinese company seemed to be "more ambitious" and less concerned with data privacy.
Read it here: I Took DNA Tests in the U.S. and China. The Results Concerned Me.
Byron's Beats
The last 5 years have been very tough for JSE listed companies. But one company has managed to grow headline earnings per share by 20% per annum over that period. Transaction Capital, the majority owner of SA Taxi reported another year of good numbers yesterday.
Earnings grew by 18% thanks to SA taxi which grew by 38%. This allowed the company to increase its dividend by 22%. Other businesses include debt collection, debt relief and payment processing in South Africa and Australia which grew by 15%.
We already own this stock for a few clients who were brave enough to invest in the SA market in the last year. We still think it has legs. If the economy picks up, even more people will have jobs and will need transport.
Michael's Musings
During massive natural disasters, many institutions run on a generator when the power supply is interrupted. The big assumption though, is that they will be able to get their hands on fuel to keep the generator running. In reality, if the power lines are down, so too is the supply of fuel. This clever solar box was born out of the need created when an earthquake hit Haiti in 2010.
The smart design allows the shipping container to be shipped around the world without much fuss. From there, it takes less than a day to set up the box. The current design would be able to power around five households. In a South African context, this box could be used to set up community centres in rural areas, where people would be able to charge cellphones, get access to free wifi and network with other people. Small things that would help empower people to build a better future for themselves.
You can read more about the box here - This single shipping container can start powering a small renewable grid in less than a day.
Bright's Banter
This morning I am listening to a very special podcast, years in the making, called Infinite Loops by Jim O'Shaughnessy. This conversation is with not one but two of the stars of the financial twitter universe who write anonymously and go by the pseudonyms RampCapitalLLC and SuperMugatu.
You can find the conversation here, unfortunately it is only available on Spotify and Libsyn
Jim O'Shaughnessy is the Chairman and Chief Investment Officer of O'Shaughnessy Asset Management (OSAM). He was a pioneer in quantitative equity research, part of an early group of explorers who combed through data to find factors which predicted future stock returns.
O'Shaughnessy is the author of four books on investing including the best seller "What Works On Wall Street". He's also done a few podcasts; one with his son Patrick on 'Invest Like The Best' and another one with Barry Ritholtz on 'Masters in Business'.
Linkfest, Lap it Up
Sand is the second most used resource on earth after water. It is used in things from buildings to electronics - Why the world is running out of sand.
Having a global and digital currency like Libra could be a game changer. Particularly for the poor and unbanked segments of the global population - Libra has logged over 51 000 mock transactions despite regulatory pushback.
Signing off
There is a slew of US economic data out today, ahead of their Thanksgiving weekend. Woolworths released a trading statement that doesn't look too bad on the surface. It is more of the same, tough times in Australia and good food sales in South Africa. The JSE All-share is higher this morning.
Sent to you by Team Vestact.