vestact posted: " Market Scorecard US markets rose to record highs again yesterday, shrugging off data that showed the economic recovery slowing slightly. US second-quarter GDP grew by 6.5%, falling short of economists' expectations of 8.4%. This is still very impr"
US markets rose to record highs again yesterday, shrugging off data that showed the economic recovery slowing slightly. US second-quarter GDP grew by 6.5%, falling short of economists' expectations of 8.4%. This is still very impressive growth!
In company news, shares of electric vehicle start-up Nikola tanked by 15% after its founder, Trevor Milton, was charged with three counts of fraud by US prosecutors. How he is still a billionaire? He took Nikola public despite not having ever produced a single working vehicle.
At the end of the day, the JSE All-share closed up 1.52%, the S&P 500 closed up 0.42%, and the Nasdaq closed up 0.11%.
Our 10c Worth
Byron's Beats
On Wednesday night Facebook released bone-crunching second quarter numbers. Revenues increased by 56% to $29 billion, and $28.6 billion of that came from advertising. So yes, this is a social media company that is really an advertising platform. Net income (profit) was $10 billion. I remember when the company listed in 2012 it made no money at all. The shares have been a 10-bagger since then.
Monthly active users on Facebook, WhatsApp and Instagram are now 2.9 billion people, up 7% year-on-year. This company is the whale of social media and that scale represents one of the biggest moats in business history.
The company is in incredible financial shape. It has $64 billion in cash and runs at an operating margin of 43%. It ticks all the boxes, a shareholder's dream.
Facebook's size and power attracts negative attention. Regulators are always on their back, and have threatened to break up the company. We think that is very unlikely to happen, but even if it did, splitting up Instagram, WhatsApp and Facebook might actually unlock value.
Their management team is notoriously cautious about giving forward guidance, but they did warn that profits would not grow as fast for the rest of the year. The share price dropped 4% on the news but not to worry, it's up by 34% so far this year.
One Thing, From Paul
Tech companies are reporting amazing results right now. This does not surprise me, because the world has changed fundamentally, in their favour.
Let me give you an example. In the "old days" by which I mean pre-Covid, retailers used to send people to actual fashion shows to decide what to make for the season ahead. Trendspotting used to happen largely in person.
Now, it's all online. Fashion buyers look to see what the cool kids are wearing on Youtube, Instagram and TikTok. That creates substantial opportunities for advertising too.
The rag trade is changed forever. Read about it in this New York Times article: What Are We Going to Wear?
Michael's Musings
Is it okay for an employer to require someone to work 72 hours a week, consistently? That's 12 hours a day, six days a week. This is what junior investment bankers go through in their two-to-three year training period. This issue has attracted some news media attention in recent weeks.
The head of JP Morgan's asset and wealth management business was interviewed on Bloomberg, and said that these tough hours are required to master the job. Sounds fair enough. She went through the gruelling training program herself. As the division CEO, I suspect she works even longer hours.
I have limited sympathy for trainees complaining to journalists, because they knew what was required before signing up for the job. It's not a secret that working at an investment bank is tough, and entry-level employees earn at least $100 000 a year. Maybe these candidates do not have what it takes to succeed in that environment? I'm sure most people would be happy to have a crack at a $100 000-a-year first job, if given the chance.
China's recent crackdown on tech companies has weighed heavily on the Tencent share price. They are the world's biggest loser by market value for July. Tencent shares tumbled by 20% in July, wiping out nearly $170 billion in market capitalisation.
Tencent wasn't the only casualty in the rout, the sell-off also affected e-commerce giant Alibaba, on-demand delivery company Meituan, agritech behemoth Pinduoduo, liquor producer Kweichow Moutai, and even Discovery's partner PingAn Insurance. Most of these businesses aren't even listed outside of China.
Chinese EdTech operators and recently US-listed ride-hailing company Didi are in real trouble. Chinese regulators have made it clear that they don't want their national champions to list outside of home markets because of data security issues.
Tencent has suspended new user registrations on their super-app WeChat, to make adjustments to its privacy settings. Antitrust regulators also stripped them of their exclusive music streaming rights.
The good news is that Tencent is listed in China and Hong Kong, while the most recent crackdown was focused on companies listed in the US.
In closing, I saw a quote that was a play on the timeless Patek Philippe watch advert: "You never actually own a Chinese stock. You merely look after it for the politburo."
Linkfest, Lap It Up
Forget about pretenders like Bill Ackman and Chamath Palihapatiya. This guy is the master of Wall Street's latest fad - Paul Glazer is the true King of SPACs.
Asian markets are down this morning with mainland China, Hong Kong and Japan closing in the red. It looks like traders haven't placed much faith in the recent efforts of the Chinese government to placate markets.
US futures are lower. The Rand is trading around R14.61 against the US Dollar. Congratulations to South Africa's finest, Tatjana Schoenmaker, for winning gold and breaking a world record in Tokyo earlier this morning!
Have a lovely weekend, and enjoy watching the Springboks.
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