Boot The Commute

Market Scorecard

US markets had a bad day yesterday, dropping sharply in the afternoon after a hot producer price inflation report hit the news wires. That rose 0.7% in January from the prior month, whereas 0.4% had been expected. Meanwhile, weekly jobless-claims data showed that the labour market remains very tight. So, the Fed must hike. Oh man, this is all so boring.

In company news, Shopify (NYSE:SHOP) dropped by 16% after posting decent earnings but making wishy-washy comments about their profit outlook. The top performer in the S&P 500 was syringe manufacturer West Pharmaceutical Services (NYSE:WST) which rose 14.5% thanks to a good quarterly report. Finally, set-top box maker Roku (NASDAQ:ROKU) surged 11% after saying it saw signs of recovery in the digital advertising market.

At the end of the trading day, the JSE All-share closed up 0.95%, but the S&P 500 sagged 1.38%, and the Nasdaq sank by 1.78%.

One Thing, From Paul

Fridays are for free advice, here on the "One Thing" column. Use it, or don't use it, it's up to you.

This thought concerns the matter of where to live. In my opinion, you should reside as close as possible to where you spend the most time.

In other words, live near to where you work. It doesn't make sense to move to a faraway suburb to get a bigger house, if it results in a lengthy commute for the main breadwinner every day. A big garden is nice, but not worth it if you have to spend your life in a car or taxi.

The best school to take your kids to is the one in walking distance from your house. Don't schlepp across town during rush hour with grumpy kids. The same is true of the shops you frequent, keep it local.

I don't think that it's a good idea to move to the coast and make someone fly up to Joburg every week for work. That won't be good for your budget or your family life.

There may be reasons that require you to compromise now, or tough phases you have to go through for a few years, but try to simplify your lifestyle and reduce your daily movements in the years ahead.

Byron's Beats

The US labour market is very confusing at the moment. Why is it so strong despite the general economic tightening that should be happening when interest rates are increased? How can unemployment be at record lows when technology companies are cutting jobs left, right and centre?

The graph below from the Wall Street Journal explains it quite well. As you can see, the leisure and hospitality sector is still recovering from Covid, and sucking in workers. Even though there has been a big job resurgence in that part of the economy, it is still below pre-Covid levels. The information technology sector, which includes all the internet businesses, shot past pre-Covid levels in 2021 and didn't look back.

There are many factors pulling the US economy in different directions, but that has always been the case. Economic forecasting is never simple and that's why predicting the short-term direction of the stock market is so tough.

Michael's Musings

Did you see that Air India just placed the largest order for new aeroplanes in history? They want 470 new aircraft, some from Airbus and some from Boeing (NYSE:BA). The plan is to revitalise the airline after decades of mismanagement and compete head on with the Gulf state airlines.

Air India used to be owned by the government, but had been loss-making since 2007, eventually costing the fiscus $2.6 million per day. The government got tired of continual bailouts, so they sold the airline to the Tata group in 2022. This story sounds like South African Airways, except for the happy ending. SAA is still grounded and tied up in layers of bureaucracy. Not Air India, they are ready to take to the skies again. Imagine going from being a national embarrassment to placing the largest plane order ever.

Interestingly, things have come full circle now as the Tata group had founded Air India in 1932 before it was nationalised in 1953. The airline was established by legendary industrialist and philanthropist JRD Tata, who also happened to be India's first licensed pilot.

Bright's Banter

The fourth quarter sales at French luxury group Kering (EPA:PRTP) fell 7%, pulled down by a decline in revenue at its biggest brand, Gucci, due to Covid lockdowns in China which led to temporary store closures.

On a full-year basis, group revenue exceeded 20 billion, up 9% year-on-year, driven by e-commerce sales, particularly in Western Europe and Japan. Gucci's 2022 revenue amounted to 10.5 billion euros, up only 1% on a comparable basis.

Gucci sales in the fourth quarter really stunk, down 14% in China. The other Kering brands did pretty well in that period. Yves Saint Laurent and Bottega Veneta grew sales by 23% and 11%, respectively, driven by directly-operated retail network stores.

Jean-Marc Duplaix, the finance chief of Kering, said Gucci's 2022 performance "did not meet our expectations", but the group was confident it could turn around the Gucci brand in 2023.

Gucci's lack of marketing investments during the pandemic was noteworthy. Rivals Louis Vuitton and Dior seemed to be much more active. In order to revitalise the brand, Kering is focusing on timeless fashions, higher-priced products, and ramping up marketing.

Signing Off

Asian markets are down this morning, with the MSCI Asia-Pacific index set for a third straight weekly decline. In China, the central bank added the largest amount of cash on record into the banking system to avoid a liquidity squeeze.

In Asian company news, Investment bank China Renaissance (HK:1911) fell as much as 50% in Hong Kong after it said it couldn't get hold of Bao Fan, its chairman, CEO and controlling shareholder. This is a bit strange.

US equity futures contracts for both the S&P 500 and Nasdaq are down in early trade. We have a normal day ahead, but disappointingly, US markets are closed on Monday for Presidents Day.

The Rand has fallen to R18.16 to the US Dollar, thanks to a mixture of a strong Dollar and a weak Rand.

Have an excellent weekend!

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