Market Scorecard
Yesterday, US markets trended lower as traders weighed up mixed macro-economic data. Fresh monthly inflation numbers showed that the concern around prices is easing, as headline CPI data fell to a year-on-year rate of just 5%. That's still too high, but not so disastrous, and coming down swiftly.
In less positive news, Fed minutes from a prior meeting showed that while policymakers are less inclined to hike rates this year after a series of bank collapses, they remain determined to keep things very tight until inflation gets back to 2%. The forward interest rate swaps market showed the odds are still in favour of a 0.25% hike in May, with a possibility of some cuts later in the year.
In company news, Triton International jumped 32% after the shipping container leasing company agreed to be bought by Brookfield Infrastructure in a $4.7 billion deal. American Airlines slipped 9.2% after the carrier cut its revenue guidance for the first quarter. The biggest gainer in the S&P 500 was a company called Bio-Techne Corp (up 4.4%). According to Wikipedia, they manufacture proteins and reagents for research and bioprocessing markets.
Yesterday, the JSE All-share closed down 0.32%, the S&P 500 fell 0.41%, and the Nasdaq lost 0.85%. Sad!
Our 10c Worth
One Thing, From Paul
Financial writer and fund manager Bob Seawright says that investing is like tennis. I don't know much about tennis, but it's an interesting analogy.
He quotes Simon Ramo, a scientist and statistician, who wrote a book called "Extraordinary Tennis for the Ordinary Player", showing that professional tennis players and weekend warriors play a fundamentally different game.
The pros win matches by hitting winners (about 80 percent of all points played). Amateur players tend to be erratic and over-confident, and make many unforced errors. In the end, someone wins because they make slightly fewer mistakes.
By working with a professional investment team, like the one at Vestact, you'll do better over time. We don't hit winners with every stock that we pick, but we are conservative, know where the best opportunities are to be found, and get it right more often than not.
We don't change our minds too often. We keep trading to a minimum, which saves you money. We'll keep you out of trouble, most of the time.
Trading for yourself may sound like fun, but if you chop and change and try to chase hot trends you assume much more risk. Unless you get lucky, your investment results will probably be worse.
Byron's Beats
Charlie Bilello pointed out that the combined market capitalisation of Apple and Microsoft ($4.7 trillion) was $2 trillion bigger than the whole Russell 2000 ($2.7 trillion). The Russell 2000 is a small-cap index made up of 2000 of the lesser stocks listed in the US.
What's even more fascinating is comparing the combined revenue and profits of Apple and Microsoft to all the stocks in the Russell 2000. Apple and Microsoft had combined revenues of $591 billion last year. The small caps had much more than that with $2.5 trillion.
However, Apple and Microsoft had combined profits of $163 billion versus $54 billion for the small caps. Which is why their valuations are so much higher. They are much more profitable.
What are the key takeaways here? I can think of two. 1) Big tech is very profitable. 2) It is easier to be profitable when you are big. Easy access to capital, large moats around established businesses, and the ability to attract the best talent are all very useful.
Michael's Musings
Many people think investing in property is a good idea. It sounds great to say you own an investment property and can 'get someone else to pay off your bond'. According to Visual Capitalist, property prices in South Africa are only up on average 72% since 2010. When you factor in inflation, prices are 5% lower in real terms.
In many cases, once you have deducted interest charges, maintenance costs, levies, taxes, insurance and property management fees, there isn't much money left over as a return. Even if you don't outsource the property management function, your time is worth something. The simple rule for property investing is to treat it as a business. If you own multiple properties you can spread your risk and reduce your admin costs.
For 95% of people, property investing is a bad idea. Rather put money to work in the stock market, which is low-maintenance and if you need it, you can get your money back within a few days. Better yet, invest into USD-based assets instead of the ZAR.
Read the Visual Capitalist article here - How global housing prices have changed since 2010.
Bright's Banter
Michael Jordan's Air Jordan 13 sneakers (pictured below) that he wore during the 1998 NBA Finals, aka "The Last Dance", just sold for a record-breaking $2.2 million! Thank you collectors for increasing the value of my AJ13s.
These kicks are now officially the most valuable sports footwear ever sold, beating out Kanye West's Nike Air Yeezy 1s, which went for $1.8 million earlier this year. Jordan signed this pair and gave them to a ball boy after the game, adding to their value.
The shoes are also known as "Bred" for their black and red colorway. It's no surprise that Jordan's sneakers are in such high demand - they represent a major piece of basketball history and are a must-have for any serious collector.
Linkfest, Lap It Up
Is Steve Jobs the secret creator of Bitcoin? Probably not - The bitcoin whitepaper is hidden in every modern copy of macOS.
Ken Griffin donated $300 million to Harvard. The university will rename its graduate school of arts and science after the billionaire hedge fund manager - It's great to see Harvard finally catching a break (lol).
Signing Off
Asian markets are a mixed bag this morning. Alibaba led the losses in Hong Kong on a report that its early-backer SoftBank is moving to sell its stake in the business. Benchmarks in Japan and South Korea were in the green, notwithstanding the news that North Korea launched a ballistic missile towards waters on the east coast of Japan. Let's face it, Kim Jong-un is a prick.
US equity futures have edged into the green this morning. The Rand is pegged at R18.39 to the US Dollar.
Take care, we'll see you here again tomorrow.
Sent to you by Team Vestact.
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