vestact posted: " Market Scorecard The market moves yesterday were the inverse of Monday. Oil stocks moved higher, the technology sector traded lower and the S&P500 had a green day. These fluctuations are meaningless, just normal market movements. Locally, t"
The market moves yesterday were the inverse of Monday. Oil stocks moved higher, the technology sector traded lower and the S&P500 had a green day. These fluctuations are meaningless, just normal market movements.
Locally, the market would have closed in the red if it wasn't for Naspers and Prosus surging by 10%. Precious metal miners had a particularly bad day with AngloGold Ashanti and Goldfields down 8% and 4%, respectively. Mining profits are determined by commodity prices and the ZAR-USD exchange rate, two factors that management can't control. Over the last week, the price of gold has gone from $1 820 to $1 730 an ounce. Who knows where it will go from here?
Yesterday the JSE All-share closed up 1.35%, the S&P 500 closed up 0.10%, and the Nasdaq closed down 0.49%.
Our 10c Worth
One Thing, From Paul
Last week I shared some simple investing tips, which earned me some nice feedback. Suitably emboldened, today I'm going to dish out some more unsolicited life advice.
To be happy, live simply. Get rid of most of your possessions. Ok, keep what you need to lead a comfortable life, but give away the rest of the junk. When my kids were growing up I made them help enforce the ACP. That stood for the "anti-crap policy".
Minimise impulsive spending. When you do acquire new things, buy the best you can afford. In other words, have fewer possessions, of a higher quality, that's another line my children have heard a lot from me over the years.
My own rule is that when I acquire a new item of clothing or a new pair of Nike running shoes, an existing one has to go out of the wardrobe, to charity.
How many older persons do you know that have a basement, spare bedroom or storage container that is jam-packed with unwanted stuff? Usually, it's a nightmare to deal with when they move, or becomes a burden to their heirs. Don't be like that.
I'm much happier spending money on meaningful experiences, like travelling. That feels more like investing than consuming to me? Making happy family memories in interesting places.
Byron's Beats
This morning Eddy Elfenbein reminded us that next week is the 50-year anniversary of when President Nixon ditched the Gold Standard. That was a very important and interesting part of financial history.
In 1944 under the Bretton Woods System, gold underpinned the US Dollar and then other global currencies were pegged to the US Dollar. Currencies were very stable but the system proved to be overly restrictive, creating many distortions in the real economy.
By the 1970s the Dollar was established enough to go it alone. As they say, the rest is history.
Eddy also points out that 10 years ago the Dow traded at 5.7 times the price of gold. Today that ratio sits at 20 times. Shares have crushed gold as an investment over the last decade. Gold has its place in history and retains value because of its physical durability, but generates no income. We much prefer to put our hard-earned cash in companies, which are productive assets.
Michael's Musings
My brother sent me a video over the weekend which was about Nick Leeson and the fall of Barings Bank in 1995. I like to think that I have a good knowledge of financial market history, but this was the first time I had heard either name.
In summary, Leeson traded in complex derivative instruments that his managers didn't fully understand, allowing him to book profits and to hide losses in secret accounts. As his losses mounted, he took on ever larger positions to try to break even. By the time a junior clerk finally stumbled across his hidden trades, he had amassed losses of $830 million, enough to bring down the bank.
You would think that regulators and bank managers would take steps to prevent rogue traders, after witnessing the collapse of a two-century old institution, but just a decade later, another loose cannon lost $7.2 billion at Societe Generale. In that case the trader made $2 billion the year before from unauthorised trades, and was then intentionally tried to lose money to cover up his previous profits. In 2011 illegal trades cost UBS $2 billion and in 2012, the London Whale blew up $6.2 billion at JP Morgan.
The recurring theme here is that complexity allows traders to conceal their true activities. The same thing happened in the 2008 financial crisis, where very few people understood the mechanics behind the re-securitisation and on-selling of US housing debt.
Here at Vestact, we prefer to keep things boring. We are like a restaurant with only two items on the menu: direct equity investing in South Africa and direct equity investing in the US. There is no debt involved, no derivatives and we avoid small-cap companies. Simple investing is good for our clients and for us.
This is how humanity spends its time online. 197 million emails are sent every 60 seconds; no wonder our inboxes are always so full - A Minute on the Internet in 2021.
Lilium plans to sell 220 electric jets for up to $1 billion to Brazilian airliner Azul. These planes use something called electric vertical takeoff and landing - Electric Jets to fly commercial by 2025.
Signing Off
The latest US inflation data will be released this afternoon. Usually this is a non-event but traders will be paying close attention this time because inflation has been moving higher, meaning that interest rates might follow.
Japanese markets are in the green at the moment, but Chinese markets are mixed. European futures are pointing towards a green open this morning.
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