Oil prices jump more than 2% after new strikes on Saudi, Strait of Hormuz
Market Scorecard
As usual, President Ramaphosa delivered a good speech yesterday. At a high level, the economic plan looks to tick the correct boxes. It sounds good to talk of reorganising the government's finances towards poverty alleviation, infrastructure investment, support for economic development and fighting crime and corruption. Execution will be key. Ramaphosa agrees. Unfortunately due to a long track record of terrible execution, many South Africans have become disillusioned with speeches. We have now reached the point where, as the saying goes, 'Actions speak louder than words'.
Yesterday the JSE All-share closed down 0.99%, the S&P 500 closed down 0.15%, and the Nasdaq closed down 0.47%.
One Thing, From Paul
It must be my age (54 years old this December) but I'm growing fonder of blog posts about ageing, maintaining financial security and staying happy in later life. Yikes!
This is a good one, by Jonathan Clements. He's the founder of a great personal finance website called Humbledollar. He was a writer at the Wall Street Journal before that.
He writes here about the three main things that he wants from his remaining years. They are to do good work, to find some balance and to help his family. He's in the process of moving to Philadelphia, to live closer to his daughter and son-in-law.
Worth a read: Three things I want from my remaining years.
Byron's Beats
The race to electric vehicle dominance will be won by who has the best battery technology. All these companies can design beautiful cars with exciting features. But not everyone can provide battery range at affordable prices.
So far Tesla has been able to provide very good range for their high end vehicles. The model S can go over 400 miles before needing a recharge. That is 640km, Johannesburg to Durban. A model S though is a very expensive car.
One solution for the price problem that Tesla are exploring is mining lithium themselves. According to this Bloomberg article Tesla have secured mining rights over 10 000 acres in Nevada.
The lithium in Nevada sits in clay deposits which are apparently very difficult to extract. According to Elon Musk, Tesla is developing a process of extraction using table salt. This has never been done on a commercial scale before.
This could prove huge for Tesla if they crack the lithium supply chain in their own back yard. The original gigafactory is also in Nevada. If they are successful, expect their lower end vehicles to drop in price fast.
Michael's Musings
Going back to Mondays theme of Nobel Prize winners in economics, here is a very interesting interview with Eugene Fama. He won the Nobel prize in 2013 for his work on the efficient market hypothesis. Making things amusing is that the other person to win the prize that year was Lars Hansen, who's work mostly contradicts Fama's.
Fama is a staunch supporter of efficient markets, meaning that the price you see today in the market, is the correct price. It assumes that the market has taken into account all the information available at the time.
Part of his view is that the Fed has a very limited impact on the long term price of stocks. The current super low interest rates are a function of the economy not Fed policy.
This is what he said about central banks: "That's why I use to say that the business of central banks is like p*rnography: In essence, it's just entertainment and it doesn't have any real effects."
Its an interesting article to read, where you will get some good insights from a very clever man.
Bright's Banter
Bernard Arnault's luxury conglomerate LVMH (PA:LVMH) which owns brands such as the cosmetic retailer Sephora, Italian jeweller Bulgari and cognac maker Hennessy released its third quarter numbers. The numbers showed a recovery in sales in its fashion and leather goods units as rich people spent more on monogram bags and dresses.
Revenues were down 7% to EUR11.96 billion, when analysts expected a 12% drop, this was boosted by a 12% increase in sales from the fashion and leather goods unit. China which has eradicated most of the virus domestically can't get their hands off LVMH's $3000-and-up Christian Dior's Bobby bags, a great substitute if you can't travel.
I wonder if these signs of a rebound in luxury goods items will translate to our local giant Richemont, keeping in mind that they're not so big in fashion and leather items. LVMH is also trying to get away from the $16 billion dud of a deal to buy Tiffany & Co (NYSE:TIF), maybe they will pursue Richemont instead?
The biggest issue for luxury goods businesses has been the global travel bans, meaning hotspots like Hong Kong, Singapore, New York etc. aren't seeing any tourist traffic that usually comes with massive sales. However, the covid-19 pandemic and its lockdowns seem to have only delayed luxury goods spending and we will see some revenge shopping in the near future.
Signing Off
Yesterday US markets started well down, but then inched higher as the trading day progressed. We are back to some hope of having a stimulus package from Congress before the election. Time will tell. The Dollar has continued to strenghten, so the Rand is currently at $/R 16.67. Have a good weekend!
