Cryptic Value, JSE All-Share Market Overview

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It's a new week and a new month. Welcome to March. February was a bit volatile for comfort but the major indexes still managed to post a green month. The S&P 500 was up 2.6% and the Nasdaq just managed a positive month with a gain of only 0.9%. The winner though was the JSE All-Share, posting a gain of 5.9%.

Making the local gain even more impressive is that Naspers (JO: NPNJn ) and Prosus (JO: PRXJn ) were flat for the month. The mining stocks have done really well of late, the Resource 20 index is already up 17% for the year. In mining, when things are going well, they are really good but when the cycle turns, then the pain sets in very quickly.

On Friday the JSE All-share closed down 1.99%, the S&P 500 closed down 0.48%, and the Nasdaq closed up 0.56%.

One Thing, From Paul

I am not especially interested in cryptocurrencies. To me, the whole blockchain thing seems like a solution looking for a problem. The "currencies" themselves (there are many) are not really an asset class. They are apparently "mined" using lots of electricity. Their prices have been rising so speculators have been rushing to join in the fun.

The idea that fake internet money is going to replace fiat currencies and the global payments system seems a bit far-fetched. I'll stick with my US Dollar denominated assets and my Visa (NYSE: V ) and PayPal shares, thanks.

When I read recently that Bitcoin was trading at a new high of over $50 000 each, my first thought was wow, that must be nice for the people that mined or bought them years ago! They should sell now. I hope that they can still remember the passwords to their digital wallets.

Cryptos are like digital gold. When I was younger, people who loved that stuff were called gold bugs. I've never been interested in holding gold either. Unproductive, shiny metal that costs money to store safely? No thanks.

Cryptocurrencies have also been likened to the art market. That analogy makes sense because artworks are also hard to make and in short supply. Serious collectors who got in early often control the secondary market, pushing up prices. When I hear that artist Jeff Koons made an artwork called Balloon Flower (Magenta) - pictured below - that sold for $25 million, my feeling is just the same. Wow, that must be nice for the people that own his other work and got in early!

Byron's Beats

Unemployment rates are still trying to recover from the various lockdowns worldwide, and things may still feel grim. But the positive data is starting to creep in slowly. Like this Bloomberg article titled American Workplace Retirement Savings Accounts Hit New Records.

Since the financial crisis of 08/09, people learnt to value the discipline of saving. Add that to an 11 year bull run and Americans finished 2020 with their largest nest egg in history. The average 401(k) balance rose 11% to $121 500 according to Fidelity. Employees managed to save 15% of their salaries which is quite impressive.

Having a big savings pool has a very positive impact on the economy. It is called the wealth effect. People are more confident to consume, go on holidays, go to restaurants and start businesses themselves. Of course, 2020 did not allow for many of those things. Once things normalise the American consumer is going to come in hot.

Michael's Musings

Would you buy virtual art? Personally, I don't see the appeal. If I buy art, I want to be able to display it in my house and have it spark an emotion every time I walk past.

Early virtual artists were struggling to protect their creations while making it easy for people to buy/ sell their artworks. The solution is cryptocurrency/ blockchain. Not to get too technical but Ethereum is a cryptocurrency designed for digital legal contracts, in this case, keeping ownership details of any particular virtual artwork.

Unlike physical art where you need to organise an auction to buy/sell, all this digital art can be bought and sold in seconds. This is an emerging asset class, mixed with cryptocurrency. So as you can imagine, some people have made huge amounts of money in a short period of time. I'll just watch from the sidelines thanks.

Bright's Banter

Coinbase has filed for an IPO amid the current bitcoin frenzy. The prominent US-based crypto exchange wants to do a direct listing. Other companies that recently did direct listings include Palantir, Slack, Asana, Spotify and more recently Roblox. The company will list on the Nasdaq, under the share code COIN.

Brian Armstrong and Fred Ehrsam founded the crypto exchange in Silicon Valley in 2012. The company has grown from a startup into a business with approximately $90 billion in assets under management and customers in more than 100 countries. According to Crunchbase, Coinbase was last valued at $8 billion when it raised $300 million in 2018.

Coinbase operates an online exchange for retail buyers and sellers to meet in the middle and find a price. It also offers a free wallet service that allows users to safely store their tokens. Coinbase could be worth over $100 billion when it comes to public markets.

Coinbase's revenues more than doubled in 2020 to $1.3 billion with profits of $322 million as cryptos rallied. In 2019, revenues were $533 million, but the company made a $30 million loss due to a weak Bitcoin price.

Today, Coinbase has over 43 million verified users, of which 2.8 million of them use the trading platform monthly. Its customers include more than 7 000 institutions, including hedge funds, money management firms, and other companies such as Tesla (NASDAQ: TSLA ), Twitter (NYSE: TWTR ), PayPal (NASDAQ: PYPL ), and MicroStrategy (NASDAQ: MSTR ) etc.

Signing Off

Local earnings continue to flow in this week. So far the mining companies have reported very strong numbers thanks to a quick rebound in commodity prices and due to a weak Rand for 2020. We also have a fuel price increase on Wednesday, with 27c of the increase coming from new taxes. The rest of the increase is due to OPEC keeping a lid on supply to drive prices higher.

Asian markets are all up this morning, in particular, Tencent (HK: 0700 ) is up 5%. It looks like we will have a green start to the new month. The Rand is currently at $/R15.01.

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