vestact posted: " Market Scorecard On Friday, pessimism continued to blanket US markets and the three major indices tumbled for a second consecutive week. The sell-off dragged the S&P 500 and the Nasdaq down by over 4% for the week. It's been tough, and we're a" Vestact - Money with a dash of funny
On Friday, pessimism continued to blanket US markets and the three major indices tumbled for a second consecutive week. The sell-off dragged the S&P 500 and the Nasdaq down by over 4% for the week. It's been tough, and we're all feeling the pain.
It may always not seem that way, but progress is certain. Consider this little comparison. Today in 1580 Francis Drake completed a circumnavigation of the world, sailing into Plymouth harbour on a little wooden ship called the Golden Hind. Now, 442 years later, a NASA rocket launched last year will blast into the Didymos asteroid, over 11 million kilometres away in space. This is a test to see if we can deflect other asteroids that may hit Earth.
In company news, Glencore has agreed to pay $500 million to settle allegations that it manipulated oil prices and bribed local officials in the US, UK and Brazil. Locally, Remgro is planning to sell its 25% stake in the South African unit of TotalEnergies, the company was last valued at R2.5 billion.
On Friday, the JSE All-share was down 2.85%, the S&P 500 flopped 1.72%, and the Nasdaq fell 1.80%.
Our 10c Worth
One Thing, From Paul
In addition to technology and healthcare, we also own some consumer stocks. Since we are long-term holders, we focus on brands so strong that they are embedded in popular culture: Nike, Starbucks, Apple and Netflix.
Here's an example of what I mean. The tweet below got over 127 500 likes. The user who tweeted it is not a celebrity, his handle is @tyler02020202. This is how young people get stuck on going to Starbucks.
For the record, Starbucks shares haven't been trading very well lately. Over the last five years, they have marginally outperformed the S&P 500, but over the last year they are down 26%. Consumer spending in the US is looking wobbly. Their business in China is still on the back foot after all the Covid lockdowns.
We remain positive about the outlook for the company because it has very loyal customers. They have a new CEO, and are doubling down on their mobile app and mobile-ordering platforms, new brewing technology, and something called "Siren" which improves coffee shop throughput and workflows. They are also scrambling to slow staff turnover in a tight labour market.
Byron's Beats
If you only started reading our newsletter this year we may sound a bit silly. We cheer the small recoveries and put on a strong face when the markets fall. We've been wrong about many of our recent calls because we are generally positive about human progress and market gains.
That's fine, we are well aware that there will be periods where we are wrong. No investing strategy is correct all the time.
Imagine how hard it is to be permanently negative about markets. Nouriel Roubini (also known as Dr. Doom) has been calling for a crash every year since 2007. He was correct in 2008 (which made him famous). Since then the market was only down again in 2018 (-6.2%) and now this year. In the 13 years since the Global Financial Crisis, this is the first time where his calls look correct.
Then you have market strategists that chop and change. That is the hardest mindset of them all. Unless you are a rockstar like Stan Druckenmiller, you are most likely to be one step behind the market - buying high and selling low.
All equity investors will be wrong sometimes, the trick is to be wrong less than the rest.
Michael's Musings
On Thursday I was moaning in the office that our central bank is too conservative. Inflation is high because oil prices are high, our increase in interest rates isn't going to change what we pay at the petrol pump. The SARB argues that by increasing interest rates, the Rand might strengthen which will in turn reduce the impact of high oil prices. Unfortunately, our currency is driven more by commodity prices than interest rates.
Mind you, we can be very thankful for Lesetja Kganyago and his team at the SARB. It is much better to be conservative and err on the side of currency value protection, than to follow populist and lax monetary policies.
Last week Turkey's central bank cut interest rates despite 80% inflation in that country. Utter madness! The Turkish Lira is collapsing because international investors don't have faith in authorities to implement tough policies to keep inflation under control.
I've written about the issues in Turkey a few times, but it is a good reminder of what can happen when wonky economic policies are the order of the day.
Bright's Banter
Last week I read a story about the Chinese tycoon who wanted to create his own version of LVMH. Qiu Yafu had a dream to turn his modest textile company into a force to be reckoned with in the luxury sector. To do that, he did what every ambitious dealmaker would do. He went on a frenzied $3 billion shopping spree six years ago.
According to Bloomberg, his company, Shandong Ruyi Group, snapped up assets from Paris to London's Savile Row, building up a portfolio with names like Lycra, Sandro, Maje, Cerruti 1881, Aquascutum, and Gives & Hawkes, the bespoke tailor that's dressed every British monarch since George III.
Today, Ruyi is in the middle of a messy unwinding and is losing control of key brands to lenders and other opportunistic vulture-type investors. Qiu is locked in a dispute with bankers as his empire unravels. He's been holed up in a Hong Kong hotel room for the past few months negotiating with creditors.
The biggest lesson for me here, outside of the obvious "don't grow too quickly using bucket loads of debt," is that it's hard to replicate a business that has been built up slowly over 35 years. If you want an LVMH, it's best just to invest in their shares and save yourself the headache.
Asian markets are continuing their decline this morning amid unrelenting pressure on risk-sensitive assets. The market in Tokyo is down the most, by 2.7% (the Nikkei 225).
The Pound led the declines among major currencies late last week, weakening as much as 5% to a record low as the UK Chancellor vowed to press on with tax cuts that could stoke inflation. The Euro is also weaker this morning as investors wonder about the impact of Italy being ruled by the most right-wing government since World War II.
US equity futures are lower again in early trade. The Rand has breached the R18.00 level to the US Dollar.
No comments:
Post a Comment