Bitcoin rallies to near $78k as Trump spurs U.S. regulatory hopes
Market Scorecard
US markets closed lower on Friday as tensions between Russia and Ukraine dominated headlines again. All three major indexes closed lower for the week, the tech-heavy Nasdaq was down 1.6%, and the broader S&P500 down 1.44%. Weirdly enough, communications services, energy, and financials were the worst-performing sectors.
In company news, Shake Shack (NYSE:SHAK) shares closed down 4%, after the burger chain reported weak revenue guidance for the upcoming quarter. Elsewhere, DraftKings saw its share price drop 22% after the sports-betting meme stock said it expects losses to widen in 2022 as the company launches in states like New York and Louisiana.
On Friday, the JSE All-share closed up 0.28%, the S&P 500 fell 0.72%, and the Nasdaq dropped 1.23%.
Bright's Banter
Last week, Nvidia reported its fourth-quarter earnings that beat analysts' expectations and provided a strong outlook for this quarter thanks to massive demand. The chipmakers' revenues came in at $7.64 billion, up 53% year-on-year as Data Center sales rose by 71% and its core gaming business (50% of sales) showed no sign of slowing down.
Nvidia was not immune to the current chip shortage, which increased lead times. However, demand for its chips has remained elevated throughout this period. Here's what CEO and co-founder Jensen Huang had to say on the issue: "We all have to recognise that the market size, our market footprint, is much larger than it used to be, we have to plan with a much larger horizon."
Nvidia relies on outsourced chip manufacturing, the above comments suggest that management may be thinking about vertically integrating its supply chain to reduce production time and improve supply predictability. This is not a foreign concept in the current environment where companies like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) have chartered ships/planes to cut the slack in their own supply chain.
The market seems to think that the $40 billion failed acquisition of ARM was a big disappointment. It is not all bad though, considering that two out of three big mergers have failed historically. Would this have been the exception? No one can know. Importantly Nvidia is still working with ARM in circuit designs for smartphones.
Nvidia's share price has come off by a fifth in 2022, giving long-term investors a second bite at this cherry, so use the opportunity to buy more!
One Thing, From Paul
I spent the last ten days in the UK, which was very interesting. It's great to be in the developed world, where the streets are clean and the buildings are in top condition. There are many delightful places to visit, shops to check out and restaurants to sample. Public transport systems are extensive, and convenient. The people are very diverse, but tolerant and friendly.
Of course, societies like the UK have been slowly evolving for many centuries. Wealth begets more wealth. Lots of well-off people living in close proximity make it possible to achieve those levels of built-environment, culture and service provision.
Here at home, in South Africa, things are wilder, newer, less established, and under-resourced. The tax base is narrower, and corruption results in a lot of public money being wasted. Over-staffing in the public sector means that not much cash is left over for infrastructure development. People have to fend for themselves, whether they are rich or poor.
It takes time for people to advance, individually and as a society. I guess we'll get there in the end.
Byron's Beats
Human perception can be a strange thing. Take a look at the two graphs below showing US retail sales versus US consumer sentiment. Despite retail sales being at all-time highs, the sentiment has dropped dramatically.
What does this mean? Well, inflation has a lot to do with it. People are paying higher prices for the same goods and feel bleak about it.
Maybe people also got spoilt by all the handouts during Covid? They were used to spending the 'free money', and now feel a bit off about having to spend their own money for the same level of consumption.
As with all things markets, there are multiple factors at play here. Every stock we own sells something to an end consumer, so we are happy that retail sales continue to do well.
Michael's Musings
There are many government inefficiencies that annoy me, the lack of public and private sector prosecutions for fraud and corruption is near the top. Post the Zondo commission, many have been listed who should have had their illegitimate assets seized and put into an orange jumpsuit. To be fair, the frauds at Steinhoff (JO:SNHJ), EOH (JO:EOHJ) and Tongaat have been around much longer than the Zondo findings.
Last week, I was pleased to read about the start of criminal charges against Tongaat executives. Now we need to see how many of the charges stick. Interestingly, the audit partner responsible for Tongaat has received a few criminal charges too. From what I understand, he is being charged for either turning a blind eye or being asleep at the wheel. Effectively, if an auditor puts their signature onto a set of financials, there is now increased accountability.
Even if the auditor isn't convicted, I suspect the accounting profession will be much more skeptical when it comes to reviewing financials.
Rob Rose, from the FM, goes into more detail here - Never before has an auditor been criminally charged for being asleep at the wheel.. This is a subscription-only link, but at R120 a month for both the Business Day & FM, it seems like very good value for money.
Signing Off
Asian markets are slightly down this morning. Today, things will be quiet, US markets close to celebrate Presidents Day, a federal holiday that recognises all US presidents.
The Rand seems to have found a new level at around $/R15.00. It is currently trading at $/R15.08.
Enjoy the last week of February.
