vestact posted: " Market Scorecard Sadly, US markets declined yesterday, for the first time in four days. Halfway through the trading session, the Fed published the minutes from its July meeting, causing a brief flurry of excitement, but the major indexes tailed of" Vestact - Money with a dash of funny
Sadly, US markets declined yesterday, for the first time in four days. Halfway through the trading session, the Fed published the minutes from its July meeting, causing a brief flurry of excitement, but the major indexes tailed off towards the end. We can take a down day every now and then. Even after this decline, the S&P 500 is up 17% from its lows in June.
Fed officials made the obvious comments about the risk of inflation pressures lingering and becoming entrenched, but also acknowledged the danger of over-tightening interest rates. The monthly US CPI reports will be very closely watched in the second half of the year.
In company news, Target shares fell 2.7% after its profits dipped sharply. Its customers cut spending on discretionary items, but sales of food and beverages, beauty products, and household items were strong. Elsewhere, instrument-maker Agilent Technologies rose by 7.2% after good results.
At the closing bell, the JSE All-share was down 0.75%, the S&P 500 fell by 0.72%, and the Nasdaq sagged by 1.25%.
Our 10c Worth
One Thing, From Paul
Many of Vestact's clients are successful entrepreneurs. Business owners are a special breed. It takes grit, determination, passion, luck, and optimism to start a small business. In South Africa, you also have to be a miracle worker.
These clients have made a profit, distributed some dividends, and placed those savings with us, to diversify their assets. That's a really good idea, because while everyone hopes to build a thriving enterprise, profits may be hard to come by, or spotty. Owning a business is risky.
Having all your assets in Rands is not ideal. If you add up your local business interests, future paychecks, local home(s), and local savings, that's a lot of Rands. I'm an optimist, but it's possible that populists take power here, and they try out things like wealth taxes, inflationary fiscal policy, and other crazy ideas that would lead to a much weaker currency. The "Sri-Lankan" scenario, if you will.
We offer the option of investing in US Dollars. As the wise old saying goes, "you should live where it's warm but invest where it's cold".
Holding offshore assets with us is also a sensible estate planning move. Even if your plan is to run your profitable business for the long term, there will come a time that it must operate without you, whether you retire, lose interest, or get hit by a bus. Your family will find it much easier to work with us than your employees or business partners, when you are gone.
Byron's Beats
Knowing some history allows you to better understand the present. It's important to keep things in perspective and have some emotional clarity. South Africa has a complex history with multiple cultures, each with their own unique character. If we all knew each other's back stories, there would be more harmony.
Michael Charlton runs an organisation called Inherit South Africa, which popularises our various stories. If you haven't watched any of his stuff, you really should. He has an upcoming show about the great women's march to the Union Buildings in 1956, called You Strike The Rock. According to Charlton "it provides a fresh, human layer to the story of the famous march by exploring the lives of its four primary leaders: Lilian Ngoyi, Helen Joseph, Sophie Williams, and Rahima Moosa".
The stories are performed live or via Zoom, if you are interested in watching this latest one, check out the website. The more people who understand the past, the better our future will be.
Michael's Musings
Yesterday Tencent announced its first year-on-year quarterly decline in revenue. A combination of Covid lockdowns and increased Chinese regulation has hurt their sales. Management noted that things seem to be stabilising and expect Tencent to return to growth.
Interestingly, Tencent has a similar problem to its largest shareholder Prosus, which is that the market isn't attaching much value to its listed assets. Over the last two decades, Tencent has been one of the leading venture capital investors in start-ups across the globe. As a result, they have a portfolio of listed investee companies (excluding subsidiaries) worth approximately $90 billion, or around 20% of their market cap.
Due to pressure from the Chinese government to reduce its influence on the Chinese economy, and to realise value for shareholders, Tencent has started to sell down these stakes. Most recently, it was announced that Tencent plans to sell all or part of its $24 billion stake in food delivery firm Meituan.
Tencent looks cheap at the moment. As things settle down in China, and as they realise value from their massive portfolio of investee companies, the share price should improve - a good thing for our stakes in Prosus and Naspers.
Bright's Banter
US private equity firm Thoma Bravo is reported to be working on a buyout offer for UK cybersecurity company Darktrace. Shares of the London-listed company have risen 41% in the last five days of trading, including a 24% pop on the takeover news. The company has only been publicly-traded for a year and has a market cap of $3.8 billion, with over 2 000 employees.
Darktrace was founded in 2013 by British Intelligence agencies and mathematicians from the University of Cambridge. They use artificial intelligence and machine learning to detect and take action against cyber-threats and irregularities across all digital environments, including the cloud, IoT, and elsewhere.
Darktrace said that it received "a number of preliminary and conditional proposals" which means even if the Thoma Bravo deal doesn't go through, there are other vultures circling. As a portfolio manager in the listed equity sector, I'm happier when these businesses stay trading in liquid markets, offering more opportunities for anyone to invest in them.
Linkfest, Lap It Up
The post-Covid work environment is hardest for mid-level managers. They are too important to work from home, but don't have the flexibility and influence of the top bosses - No one wants to be a middle manager anymore.
Asian markets are down this morning as investors worry about the economic outlook in China. Bourses in Hong Kong, Japan, mainland China, and South Korea have all dipped, sadly.
US equity futures are also down a bit, but it's still early in the day and anyone's game. The Rand has weakened to R16.70 to the US Dollar.
Over 250 years ago in 1769 a lightning strike on the Bastion of San Nazaro in Brescia, Italy, ignited 90 tons of gunpowder, killing 3 000 people. See if you can get through the day without anything bad like that happening to you. Good luck!
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