Amazon Nukes

Market scorecard

US markets shrugged off a stronger-than-expected inflation print yesterday, and powered upwards. This was especially pleasing because the S&P 500 usually goes down by more than 1% on the day of a hot CPI release. For one reason or another, traders were encouraged by the underlying trends in the report.

In company news, Porsche (ETR:P911_p) soared 11.5% after reporting record sales of their fancy cars. Elsewhere, Swiss shoemaker On Running tumbled 9% despite "personal best" revenues, because of setting out a disappointing outlook for the rest of the year. The market clearly expects them to sprint faster. Lastly, Southwest Airlines (NYSE:LUV) slid 15% due to expected delays in aircraft deliveries from Boeing (NYSE:BA).

At the end of the day, the JSE All-share was practically unchanged, the S&P 500 rose 1.12%, and the Nasdaq danced 1.54% higher. That's more like it.

One thing, from Paul

I've always been sceptical about nuclear power because it sounds good in theory, but is very hard to deploy. Sure, it's "green" because it doesn't involve burning tons of dirty coal or spewing carbon dioxide, but uranium-based reactors are notoriously expensive to build. They're also unsafe due to possible radiation leaks, so they require very careful management.

In a country like South Africa, which is cash-strapped and run by incompetents, large-scale nuclear plants are a very bad idea. Just a silly pipe-dream, given our credit rating. It worries me that Eskom, which is a hapless mess, has Koeberg to look after. If I lived in Cape Town, I'd be concerned (just move back to Joburg).

Small-scale, factory-assembled, plug-and-play nukes sound cool but the tech is hard, and I'm not sure they'll be available anytime soon.

Anyway, those are just my views. Due to demand for new AI data centres, Amazon (NASDAQ:AMZN) Web Services (AWS) has done a deal with power provider Talen Energy to buy its existing data centre campus in Luzerne County, Pennsylvania, for $650 million. The facility will be expanded to chew 960-megawatts.

Talen Energy owns the adjacent nuclear power station, called the Susquehanna Steam Electric Station, that came online in 1983 and puts out 2 500 megawatts.

Amazon likes the idea of green power. What will they call this new division? Probably Amazon Nukes.

Byron's beats

Morgan Housel wrote another banger last week called The Dumber Side of Smart People. I loved this paragraph and I concur with every word.

"I've come to believe that part of the reason professional money managers produce such lousy returns is because the industry attracts such intelligent people. They're too smart for their own good. There's a fine line between intellectual rigor and believing your own BS, and smart people are at more risk than ordinary folks."

At Vestact, we offer non-discretionary accounts, which means our clients have the final say on what happens in their portfolios. Often, clients who are very smart and well accomplished in their own fields struggle to make decisions because they think too deeply about the investment.

Amongst my professional investment peers, I've seen some of the smartest minds become too critical about the macro environment and end up sitting on way too much cash. Over time its best to be fully invested, as I noted in my last note.

Michael's musings

Yesterday I mentioned that Saudi Aramco (TADAWUL:2222) is currently printing money thanks to its very cheap oil production. The company will pay the Saudi government about $100 billion in dividends this year. So what are the Saudis doing with these sweet dividend cheques?

Well, apart from spending billions on reshaping the pro-sporting world, the kingdom has also embarked on building a $1 trillion project known as NEOM. The best-known part of NEOM is the 100-mile-long city called The Line. Here is a video giving an update on the progress of the project - Saudi Arabia Reveals NEOM's 10 rew Regions.

The first phase is expected to be completed in 2030. I'm very interested to see how reality matches up with the vision because it seems the architects of NEOM were told to dream big and assume no restrictions. NEOM could literally become a money pit or it could be the next phase in the kingdom's transition away from oil.

Bright's banter

Reddit is diving into the IPO pool with plans to raise $748 million at a valuation of about $6.4 billion. The valuation is slightly down from its previous high of $10 billion.

In 2023, Reddit reported a net loss of $90.8 million, but things are looking up, with a net income of approximately $18.5 million in the last quarter of 2023.

Reddit's IPO plans have surfaced fast, less than three weeks after the company applied to list its shares on the New York Stock Exchange under the symbol RDDT. Exciting times ahead for what Redditors call the "front page of the internet".

Signing off

Asian markets are mixed this morning. Benchmarks rose in Hong Kong and South Korea, while they slipped in India, Japan, and mainland China.

Chinese property developers continue to flounder with Country Garden (HK:2007) missing its latest bond payment. China Vanke is also in talks with banks to do a debt swap deal to avoid its first-ever bond default. How does this mess with the politburo's plan to grow the economy by 5% this year?

US equity futures are in the green pre-market. The Rand is trading at around R18.66 to the greenback.

Volkswagen (ETR:VOWG_p) and Adidas (ETR:ADSGN) will report their earnings today.

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