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Yesterday Stats SA released South Africa's inflation figure for May, coming in at 2.1% - the lowest it's been since September 2004. In January and April inflation was 4.5% and 3% respectively. The massive drop has been lead by the lower petrol price, which unfortunately means that inflation will start to tick up again with the rise in oil prices.
With inflation at 2.1%, it means we are sitting below the SARB's target range of 3-6%, with the unofficial target being 4.5%. Does that mean we will see another interest rate cut next week when the MPC sits to discuss just that? The debt markets are pricing in another interest rate drop this year, and with the local economy getting decimated, a rate cut next week is entirely possible.
Yesterday the JSE All-share closed up 0.75%, the S&P 500 closed up 0.91%, and the Nasdaq closed up 0.59%.
One Thing, From Paul
This week I'm sharing stories about interesting people and their relationships with money. Next up is Charlie Munger, now 96-years old, he is an American investor and vice chairman of Berkshire Hathaway (NYSE:BRKa), the conglomerate controlled by Warren Buffett. His personal worth is about $1.7 billion.
Munger wrote a book called Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger, in 2005. I'm told that it is a bit of shambles, with a mixture of light prose and some pictures.
When it comes to investing, Munger believes that it's good to have a multi-disciplinary approach. He says that learning is a life's work. "We all start out stupid and we all have a hard time staying sensible, and you have to keep working at it." Investors should turn themselves into learning machines by reading constantly - and not just about investing. "I never liked specialization," he said. "I like romping over a whole field."
Munger enjoys architecture and has designed multiple buildings, including dormitories at Stanford University and the University of Michigan. He typically gives these universities many tens of millions of US dollars, so long as they adopt his designs. In one case, he insisted that the student residences have well-appointed common areas, but small bedrooms with no windows, to promote "collegiality". Very odd!
Michael's Musings
Yesterday Apple (NASDAQ:AAPL) won their court challenge to the long standing tax dispute with the EU. The dispute is over $14.9 billion which is roughly R250 billion - the same value as Standard Bank (JO:SBKJ) and Absa (JO:ABGJ) put together. It is a large number, but in Apple's life it is probably less significant given that they already have around $190 billion in cash.
The ruling yesterday by the General Court of the European Union, the second highest court in the union, overturned a decision made by the European Commission in 2016. More than likely this decision will be appealed by the EU Commission, which will send it one court higher, to the supreme court. The ruling from the supreme court would then be final, when that happens one day.
At the centre of the debate is the EU's claim that Ireland gave Apple a special status, something that other companies couldn't obtain. The special status then allowed Apple to pay lower taxes in Ireland than they would have in other EU nations. It is worth noting that in this court case, it is Apple and Ireland, up against the EU Commission. The Irish government, who will be receiving the tax, don't even think they should be receiving it.
With the rise of e-commerce, these sort of tax debates will also increase. Where should a company pay taxes - where the service is created or where it is consumed? This ruling from the EU will play a role in setting precedent for international tax law. For now as Apple shareholders, we will take this win.
Signing Off
Chinese GDP out this morning showed that their economy grew by 3.2% in Q2, better than expected. Unfortunately, data showed that retail sales for June were worse than expected. We have J&J (NYSE:JNJ) reporting today before the US market opens and Netflix (NASDAQ:NFLX) is reporting after the market close. Exciting! Globally, the sentiment is negative today. The JSE All-share is lower this morning and the Rand has given up gains that it made yesterday, now trading at $/R 16.67.
