Market Scorecard
Yesterday, US markets closed flat as inflation concerns took centre stage once again. The good news is that more than half of the US population has received at least one dose of the Covid-19 vaccine.
Here in Mzansi, we have now crossed the 1 million mark of people vaccinated with at least one shot. That includes the healthcare workers who participated in the earlier Johnson & Johnson trial.
In company news overnight, Johnson & Johnson might have to pay $2.1 billion to individuals who said its baby powder was contaminated with carcinogenic asbestos, thus giving them cancer. The US Supreme Court rejected the company's appeal to a 2018 verdict that its product contributed to ovarian cancer in 20 women.
Yesterday the JSE All-share closed up 1.41%, the S&P 500 closed down 0.05%, and the Nasdaq closed down 0.09%.
One Thing, From Paul
There is a major debate in economics right now, and I don't know what to think about it. It's whether the current excessive level of fiscal spending in the US will cause a lasting rise in inflation.
Here's Bloomberg's Matt Boesler: "Covid has triggered a tectonic shift in economics. Out went an approach that prioritized curbing inflation and managing growth by adjusting the cost of borrowing rather than public spending. In came the new paradigm, in which fiscal policy took over from monetary policy."
US inflation in April was 4.2%, the highest since 2008. Bond-market measures of expected inflation over the next five years are also at decade-highs. Personally, I'm concerned that it will come back with a vengeance, but plenty of people seem to think that this risk is transitory.
In addition, I worry that the global trend is towards ever greater participation in the economy by the state. I'd prefer to see things going in the other direction.
What I can tell you is that I plan to hold stocks while this plays itself out. Even if inflation does pick up, equities are the asset class to be in. Stay long and strong.
Byron's Beats
If you want to get a sense of PayPal's (NASDAQ:PYPL) dominance in the world of payments, give this article a read - PayPal Leads Mobile Wallet Race With Half Of Online Transactions.
A survey suggests that 47% of online sales go through PayPal. The next biggest competitors are Apple (NASDAQ:AAPL) Pay with 15% and Google (NASDAQ:GOOGL) Pay with 11%.
Even in-store transactions are dominated by PayPal, with 28% of mobile wallet payments coming from PayPal in-store; Apple Pay reached 15% at its peak.
PayPal is the leader in digital wallets, space where scale is key. Although there is a lot of room for competitors, we feel PayPal's first-mover advantage will allow it to dominate for a while to come.
Michael's Musings
As regular readers will know, I studied economics at university way back when beer was cheap and 2-minute noodles were considered a balanced diet. A central theme in economics is the focus on the best and most efficient way to allocate resources. In very simple terms, we live in a world of limited resources. The only way for humanity to improve is to find more efficient ways to use those resources.
Companies are constantly coming up with clever ideas to make their business models more efficient and in the process add value. H&M's second-hand clothing shop called Sellpy is a great example of this in action. The business will buy second-hand clothes, transport them, photograph them and then sell them online.
The H&M (ST:HMb) core business is to get large volumes of clothes into shops quickly and at low prices. It has served them well so far, but it also promotes high levels of waste. Buy something this season, throw it away the next. The new business is intended to help H&M become more sustainable. What is really interesting is that Sellpy is now valued at EUR 3.5 billion. Not bad for a company selling unfashionable second-hand clothes.
Bright's Banter
Forbes' Global 2000 list of most profitable public businesses came out recently, showing that Saudi Aramco (SE:2222) was unseated from the top spot.
Tech companies benefited from the work-from-home trend, which helped Apple and Microsoft (NASDAQ:MSFT) secure the top two spots with profits of $63.9 billion and 51.3 billion, respectively. Saudi Aramco slid to third place as oil suffered during the pandemic after holding the number one spot prior to its 2019 listing.
Below is an infographic showing 2020 profits of publicly listed companies in US dollars.
Signing Off
Asian markets are mixed this morning with Japanese markets surging higher while Chinese mainland and Hong Kong markets are in the red. The Rand is trading at R13.77 to the Dollar.