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A Bright New Podcast

Market Scorecard



The focus for the market will start to shift towards Q2 earnings season which takes off next week. There is a trickle of companies coming out later this week, including Delta Air-lines, but things really get going on Tuesday next week when the big banks report. The stock market has penciled in a 44% drop in profits for this earnings season. To be clear, if on average profits are only down 40%, that is a beat on market expectations. The market already knows that this earnings season is going to be bad. It is the unexpected things that move market prices.

From a market expectations point of view, the forecast is for companies to only get back to pre-Covid levels in around 2022. Many who read that will be asking why the market is at record highs then? Interest rates are significantly lower now than they were in the beginning of the year. Having interest rates at zero or negative, automatically makes stocks worth more. Coupled with that, this lockdown has shown society that we will adopt new technologies quicker than expected. The implication is that technology companies are now more valuable because there is a greater demand for their product. Covid has made technology companies permanently more profitable, thus the surge in their share prices.

This morning Fujitsua announced that they intend to halve their office space over the next three years. Around 80 000 workers are expected to be impacted, they will be paid a bit extra to work at home. For the changes to happen in the space of three years is very quick! Many more companies will be doing similar things, and it is all made possible by technology companies.

On Friday the JSE All-share closed down 0.17% and the US markets were closed.




Our 10c Worth


One thing, from Paul

I'm going with an easy-reading One Thing to get your week off to a quick start. I enjoyed this blog post from Ben Carlson over the weekend.

Ben says not everyone likes to read long-winded finance books, so he went through the most established classics and distilled their central message into a single phrase. Here are the ones that I liked the most.

The Intelligent Investor by Benjamin Graham: give yourself a margin of safety because Mr. Market can be insane.

One Up on Wall Street by Peter Lynch: buy what you know.

Reminiscences of a Stock Operator by Edwin LeFevre: the trend is your friend.

Where Are the Customers Yachts? by Fred Schwed: Wall Street can be an unforgiving place.

Common Stocks and Uncommon Profits by Philip A. Fisher: buy high-quality stocks and never sell.

The Black Swan by Nassim Taleb: sh1t happens.

The Alchemy of Finance by George Soros: markets are one giant feedback loop.

Liar's Poker by Michael Lewis: greed is good…for Wall Street.

Stocks For the Long Run by Jeremy Siegel: buy and hold.

The Little Book of Common Sense Investing by Jack Bogle: costs matter.

When Genius Failed by Roger Lowenstein: temperament is more important than IQ.

Winning the Loser's Game by Charles Ellis: you win at the game of investing by avoiding mistakes.

Your Money & Your Brain by Jason Zweig: we're not hardwired to be successful investors.

The Millionaire Next Door by Thomas Stanley: live below your means.

There you have it. That's good value for your reading time! If you want to actually read some of these books, follow the link below, through twitter, is to Ben Carlson's blog post where you will find links to each on Amazon eBooks. His blog site is called A Wealth of Common Sense.








Byron's Beats

It has been tough going since Amazon earmarked India as a big growth target. They have ploughed billions of dollars into that business but policy supporting local businesses seems to be working against them.

In a recent policy draft, rules about handling data may be implemented to ensure competition. Remember that using customer data is one of the keys to Amazon's success. The rules would create an ecommerce regulator which could allow government access to big tech's algorithms.

Even as a shareholder of Amazon I can understand where the Indian government is coming from. Like China they have immediate scale within their own borders. Local companies can become massive without having to compete offshore.

Amazon have partnered with a few local businesses to try and mitigate these issues. I think they will do well in India but not spectacularly. The local companies will always be favoured. This Bloomberg article covers the proposed policy in more detail.








Michael's Musings

As the world moves to demanding more organically farmed produce, farming methods need to adapt accordingly. One of the criticisms of organic farming is that it is less efficient to conventional farming methods. For example, not being able to spray herbicides means that plants are fighting weeds for nutrients. To weed by hand is a rather labour intensive process.

One solution is to start introducing robots into the process. Imagine a robot rolling through the field, day or night, and pulling out weeds. Another application could be having robots or drones going through the crops finding plants that are being attacked by insects, and dealing with it on a plant by plant basis.

Robots give flexibility to farming, where farmers can deal with issues on a case by case basis, instead of needing a blanket approach of spraying all their crops. Technology will continue to improve the way that we produce food, ultimately leading to cheaper and healthier produce. (Robots bring new meaning to the term 'food security'.)








Bright's Banter

I have a new podcast titled "The Art of Randomness" where we deep dive into the minds of the most influential, savvy, and successful people in the world of business, finance, and investing. The podcast explores how these industry heavyweights became the professionals they are today: what motivates them, who their mentors are, what books do they read, what their daily routines look like, and the process that goes into running their businesses.

In this podcast we're joined by legendary value investor Piet Viljoen, the founder of Regarding Capital Management (RECM) and and co-founder of RECM & Calibre (RAC, a JSE listed entity). Piet Viljoen recently merged his asset management business RECM with Counterpoint, a business that was founded by his former Allan Gray & Investec colleague Sam Houlie.

Piet started out as a lecturer at the University of Pretoria, and then joined the Reserve Bank as an economic analyst. He became a portfolio manager at Allan Gray Investment Counsel in 1991 and in 1995 he moved to Investec Asset Management.

Piet discusses the ups and downs of being a value investor, going against the crowd and the kind of temperament needed in order to succeed in that calling. He walks us through the journey of how his business partner Theunis de Bruyn (not the cricketer, but the investor) nudged him to start his own shop, and we also find out why he's so obsessed with cycling and fine art.

He's described the journey as "life changing" as he had to sell his house and rent in order to achieve his goals. He also shares some of his early investments in businesses like Dischem and Goldrush and some of his biggest failures both in investing and in life. I hope you enjoy this podcast as much as I did making it!

Don't forget to hit the subscribe button and rate the podcast on iTunes, Spotify, Google Podcasts, PocketCast, and wherever you consume your podcasts.






Linkfest, Lap it Up


It is great to read about South African companies making waves internationally - SA Fintech Mama Money expands globally.

One of the downsides of renting is that after 20 years of monthly payments, you still don't own your own property. The massive up-side of renting is that it is much cheaper than property ownership. This company looks to take the best of both worlds by giving renters a small equity stake in their building - This startup gives renters a financial stake in their apartments.




Signing off


There is retail sales out of the EU this morning and then manufacturing data out of the US this afternoon. The JSE All-share is slightly higher this morning and the Rand is holding steady at $/R16.96.

Sent to you by Team Vestact


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