vestact posted: " Market Scorecard US markets had a down day yesterday, after a bleak report about consumer confidence dampened the mood. Large tech stocks sagged, and since we own a lot of them, it was a bad day for our portfolios. In more positive news, China'" Vestact - Money with a dash of funny
US markets had a down day yesterday, after a bleak report about consumer confidence dampened the mood. Large tech stocks sagged, and since we own a lot of them, it was a bad day for our portfolios.
In more positive news, China's National Health Commission's cut the required quarantine times for travellers in half, in a sign that the country may be loosening its most stringent Covid zero policies that were a major handbrake on economic growth.
In company corner, Tesla laid off two hundred workers from its autopilot team in California. Elsewhere, Indian online-education provider Byju's has offered to buy 2U Inc. in a cash deal that values the US-listed education firm at more than $1 billion. The $15 per share offer is 61% higher than where the shares traded before the announcement.
At the end of the day, the JSE All-share closed up 0.34%, the S&P 500 lost 2.01%, and the Nasdaq fell a painful 2.98%.
Our 10c Worth
Michael's Musings
On Monday night Nike released their latest set of quarterly results. They were a mixed bag that slightly disappointed the market. In common with other multinationals, there were three main talking points: Covid, Russian-warmongering and supply chain issues.
Due to hard Covid lockdowns in China, Nike's sales in that country dropped by 20% for the quarter. The good news is that sales are expected to rebound quickly as the draconian restrictions are lifted.
Nike is officially pulling out of Russia. This is mostly a symbolic move because less than 1% of their sales come from that country. Other regions will need to make up the difference.
With current global supply chain bottlenecks, inventory levels have risen by 23%. Nike increased stock on hand to ensure they are not caught short if there are further supply chain surprises. Longer delivery times due to shipping snafus means more stock is 'on the water'. Higher inventory levels result in higher operating costs.
Thanks to all of the above, Nike's sales were 1% lower for the quarter than this time last year, and profit margins narrowed. Price increases scheduled for the end of the year will help matters. When we review their results in the middle of next year, all these issues should be behind us, and Nike will be on the road higher. We hope to hold shares in this quality company forever.
One Thing, From Paul
Charlie Munger is a 98-year-old billionaire and the vice-chairman of Berkshire Hathaway, the conglomerate controlled by his pal Warren Buffett. I loved this quote of Charlie's:
"I did not intend to get rich. I wanted to get independent, I just overshot".
Financial independence means having sufficient investments to do what you want to do without having to work. In other words, you have the capital to cover your living expenses, forever.
Of course, if you like working, you can keep going. But if you don't, you can stop. You could switch to your hobby, or volunteering in a badly-paid job that you're passionate about. I suppose it wouldn't matter if you got fired or cancelled either, since you're a free person.
Once you attain financial independence, you don't need handouts from others to survive. Instead, you can afford to be generous. That's a far better position to be in.
Byron's Beats
There's been a lot of talk about Amazon retail coming to South Africa in 2023. At the same time, Takealot (via Naspers) released solid results this week, showing revenues up by 34% to R13.5 billion for the year. For perspective, Shoprite has revenues of R171 billion. Takealot still has a long way to go to run with the big dogs, but it's growing well.
Should Takealot be worried that Amazon is coming to SA? I would be surprised if our nosy government doesn't get involved here and make things difficult for Amazon. Remember what a pain they were when Walmart wanted to buy into Massmart? Naturally, I disagree with their protectionist policies, because Amazon will invest heavily to build a new distribution network. That will give local suppliers more options and most importantly, South African consumers will have more choices. But let's not jump to conclusions.
Takealot has a huge first-mover advantage. They have the infrastructure, supply agreements, and loyal customers. Online retail is capital intensive and hard work. On top of that, most other traditional store-based retailers have developed online services too. Amazon will not be an overnight success here.
Having said all that, Amazon is great at execution so they will likely have an amazing service up and running in a few years. There is room for many players here and the consumer will be the biggest beneficiary.
Bright's Banter
A few months ago I wrote about how Rolex watches had outperformed other assets over ten years. Today, I bring to you the Subdial50, an investable index that tracks global prices for the 50 most-traded luxury watches by value.
The index includes the colourful Rolex Datejust, the gorgeous Rolex Day-Date, the big-daddy Rolex Daytona, the sought-after blue dial Patek Philippe Nautilus 5711, and the boring Audemars Piguet Royal Oak. Note: the just-used adjectives are all mine.
The Subdial50 index is up 40% in the past twelve months, thanks to the surge in interest in luxury watches during Covid when consumers were stuck at home and flush with cash. The impressive move beats the classic car index, which is only up 21.8% in the same period, and comfortably beating the S&P 500's minus 1%.
I still question the costs associated with owning a luxury watch collection - insurance, storage, and security which add up over time. So having a tradable index without directly taking the risk of holding the underlying makes sense, but I'm skeptical of these exotic financial inventions. I'm not sure if owners of this "instrument" will become staid watch collectors and hobbyists.
Eastern markets are battling this morning, with markets in Hong Kong, Shanghai and Tokyo all down over 1%. Even India is lower.
Oil prices have been climbing again in recent days, which is annoying.
US equity futures are flat in early trade, but Wall Street will only open in 5 hours' time and a lot can happen between now and then. The Rand has weakened a bit to R16.08 against the greenback. To be fair, this is mainly due to a stronger Dollar, not on concerns about local rolling blackouts.
Have a good day, let's hope the lights come back on soon.
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