Market scorecard
US markets edged up slightly last night, kicking off a week that will be packed with important corporate earnings reports. Energy was the worst-performing sector in the S&P 500, impacted by a drop in oil prices. A gauge of the "Magnificent Seven" megacaps rose by 1%.
In company news, McDonald's (NYSE:MCD) swelled by 3.7% despite reporting a 1% decline in US same-store sales, the first quarterly drop since "revenge eating" became a thing after Covid. They maintained their guidance for new stores, capital expenditures, and operating margins. Elsewhere, Heineken (AS:HEIN) fizzled by 8.2% thanks to a flat performance from its investment in a Chinese brewer.
In summary, the JSE All-share closed down 0.13%, the S&P 500 sneaked in a gain of 0.08%, and the Nasdaq was only 0.07% higher. Hey, still counts.
One thing, from Paul
An acquaintance of mine on a forecasting forum asked, "why don't people spend more time trying to predict the future?"
That's a good question, because if we were better prepared for what might happen next, we would be a more successful species.
It's even more pressing for equity investors. Accurately anticipating future trends is hugely beneficial - if it leads to better stock picking.
Two answers come to mind (1) forecasting is hard, and most people are not very good at abstract thinking. They'd rather focus on the very near term, like what's for dinner? (2) Brainstorming and assigning probabilities to possible outcomes requires specific training and regular practice.
Anyway, once you have a view of what you think is quite likely to happen in future, prepare to make changes to that forecast. Constant monitoring of news events, and reading insightful analyses of current trends should be allowed to influence your sense of what's shaping up in years ahead. You have to remain actively open-minded. Be a fox, not a hedgehog.
Byron's beats
The South African informal economy is fascinating. Some say the informal economy contributes a lot more than reported in the official statistics, especially employment. One of the most prominent voices on the topic is writer GG Alcock.
I really enjoyed this interview on BizNewsTv with Alec Hogg, GG Alcock and Tsitso Setai. Tsitso is an entrepreneur who founded an auctioneering business for townships. Because so many people in townships cannot afford new items, an auction house for second-hand goods sounds like a brilliant solution. I was surprised to hear that the concept was relatively new within that sector of the economy.
South Africa is full of resourceful people running unregistered businesses and our high unemployment stats fail to recognize them. We should be giving more credit and airtime to people like Tsitso.
Michael's musings
We all felt courageous in 2020 when we emerged from the worst of the Covid lockdowns. We had survived the virus and isolation, the only way forward was up. During that exciting period, Sun Exchange was gaining traction as an investment platform - we even mentioned them in this newsletter, as we like to see local companies do well.
Sun Exchange was doing crowdfunding for large solar projects. They would find large power users, like wine farms or schools, and sign 20-year power supply agreements. They would go to the public to raise funds to purchase the equipment. Investors would receive a set rate for every kW generated by the solar plant, with an annual escalation. Sun Exchange would receive a fee for doing all the work.
Four years ago, interest rates were at historically low levels, and Sun Exchange was offering an annual return of around 12% a year. This sounded great. Not only would investors make a nice return, but they were helping local organisations get off the grid.
Sadly, Sun Exchange has decided that they don't like dealing with thousands of retail investors, and are instead focusing on large institutions. As a result, they have on-sold most of their solar projects. Unfortunately, interest rates are much higher today than back then, so the projects are all worth much less. Not to mention all the fees involved in buying and selling the assets.
I put a small amount of money into Sun Exchange back in 2020. Four years later, instead of getting a 12% return a year, I made a loss of 20%. It is a reminder of how superior the stock market is to all other asset classes.
Bright's banter
Alan Hatherly has made history for South African mountain biking by clinching the bronze medal in the men's cross-country event at the Olympic Games.
Racing at Elancourt Hill, just outside Paris, Hatherly secured his spot on the podium with an outstanding performance, finishing just 11 seconds behind gold medalist Tom Pidcock of Great Britain and silver medalist Victor Koretzky of France.
Hatherly's bronze medal is a landmark achievement as he becomes the first African cyclist to win an Olympic medal in cross-country mountain biking.
Hatherly's remarkable season continues as he leads the UCI Mountain Bike World Cup XCO series. He also became the first South African to win an XCO World Cup race earlier in July at Les Gets, France. There, he impressively took both the XCO and short-track victories.
His bronze medal is not just a personal triumph but a historic moment for African mountain biking. Well done man!
Signing off
Asian markets are mostly down this morning with the MSCI Asia-Pacific index set for its first monthly drop since April. Equity benchmarks fell in Hong Kong, Japan, mainland China, South Korea, and Taiwan but rose in India.
In local company news, BHP Group (JO:BHPJ) has partnered with Lundin Mining (TSX:LUN) to acquire Filo Corp (TSX:FIL), securing access to some copper projects in South America. TotalEnergies (EPA:TTEF) walked away from a SA gas field project due to regulatory obstacles, and will write off $400 million. Yikes.
US equity futures are a touch lower in early pre-market trade. The Rand is at R18.43 to the US Dollar.
Today, our eyes will be on Microsoft (NASDAQ:MSFT) and Stryker (NYSE:SYK)'s earnings after the closing bell. Others will be standing by for numbers from Procter & Gamble (NYSE:PG), Pfizer (NYSE:PFE) and Merck (NYSE:MRK), before the open.
Congrats to Tatjana Smith for getting our first gold medal of these games. Now onto the 200m Breaststroke, we are hopeful for another win.
Enjoy your day.