Market Scorecard
The Nasdaq is at a record high and the S&P 500 is now positive for the year. If you had fallen asleep in February and woken up today, the only way you would know something happened is all the people walking around with face masks. Vestact by default is optimistic about the future of stocks. Looking back over the years, we make as much money for our clients by keeping them invested during the bad times, as we do picking growth stocks for the good times.
Buffett talks about only buying a stock that you would be happy to hold if you knew that the stock market would close tomorrow for five years. Imagine going through this Covid crisis without seeing daily asset price quotes. Imagine if the stock market was closed, and would be closed for a few years. That is the long term view you need to take with your investments. In 5-years time, will Nike sell more or fewer shoes; will Amazon have more or fewer deliveries; will Visa see more swipes or less? Taking the longterm view helps you ride out turbulent times.
Yesterday the JSE All-share closed down 0.07%, the S&P 500 closed up 1.20%, and the Nasdaq closed up 1.13%.
One thing, from Paul
Widespread support for the Black Lives Matter movement has dominated the news in recent days. Here is a collection of comments from senior executives of US corporations on the issue. We own shares in some of these companies, so it is good to see that everyone is on board. Racism and discrimination is a scourge and must be resisted.
"As the CEO of the world's largest health-care company, I must state unequivocally that racism in any form is unacceptable, and that black lives matter." - Johnson & Johnson CEO Alex Gorsky.
"We have to re-examine our own views and actions in light of a pain that is deeply felt but too often ignored" - Apple CEO Tim Cook.
"We've got a problem. . .We have a big problem and it needs to be dealt with" - AT&T CEO Randall Stephenson.
"There are structural barriers in place that keep these disparities in place" - American Airlines CEO Doug Parker.
"Recent events have forced us to reflect on the severity of these issues, but these events are symptoms of a deep and longstanding problem in our society and must be addressed on both a personal and systemic level." - BlackRock CEO Larry Fink.
"We can't heal without truly understanding the depth of the disease" - JPMorgan Consumer Bank CEO Thasunda Duckett.
"What we see is a moment here, a moment where we can make a bigger difference" - Walmart CEO Doug McMillon.
"I know for sure that what put my life on a different trajectory was that someone intervened to give me an opportunity, to close that opportunity gap. And that opportunity gap is still there." - Merck CEO Kenneth Frazier
Byron's Beats
Bloomberg are running an evolving story on behavioural shifts that have happened since lockdown. We have spoken about this topic extensively but as the stats start coming in, we can start piecing together how people really behaved.
Online shopping, video communication, home improvements, food delivery, fitness and many other trends are examined. For example, Walmart saw a 74% growth in online sales from February to April. I think much of this behaviour will be entrenched. I, for one, will continue to do most of my shopping online. Home fitness is another trend I think will continue post lockdown.
Many companies have received a huge boost because of this fast adoption. The trick is to manage the surge in demand and keep those clients happy. This can sometimes prove harder than expected after growing so quickly. That is why we prefer to stick with the big established players.
Michael's Musings
Since Covid-19 arrived earlier this year, many, many people have made forecasts about where things will go, and by extension had theories about the best way to handle the spread of the virus. The problem of course is that we are in uncharted territory, and we don't have much data to make these forecasts. Not to mention that we don't fully understand Covid-19.
In a recent memo to clients, Howard Marks reminds us of what Buffett said in 1977 - "Forecasts usually tell us more of the forecaster than of the future".
Last month many social media 'experts' were saying that Sweden is the shining light on how to handle the virus. The country had very light restrictions, and seemingly very low case numbers. The strategy looks to have backfired though.
It is worth noting that we can only judge the success of each strategy once Covid-19 is under control. Who knows, maybe other countries see a second wave soon and Sweden doesn't? Until we get through this, there are still too many unknowns to make hard judgements.
Bright's Banter
Our friends at Statista made a super cool infographic showing the estimated cost per seat for astronauts on certain space missions that the US has endeavoured. The notable difference is the fact that Elon Musk's SpaceX company has been a massive game changer for the American space program and NASA.
NASA lost the ability to send astronauts into orbit when the Space Shuttle program ended in 2011; and the US went to bed with the Russians (Soyuz) as they used their spacecrafts for almost a decade. This wasn't a long-term plan though as US private aerospace companies in the form of Jeff Bezos' Blue Origin, Elon Musk's SpaceX and Boeing's space program were working hard to make it affordable to send people to space.
Fast-forward to 2020, SpaceX's reusable Falcon 9 rocket and the Crew Dragon capsule lifted off from the Kennedy Space Center last Saturday. This is great for America as they get a second chance at trying to dominate the space race.
Astronauts Bob Behnken and Doug Hurley safely reached orbit and docked with the International Space Station on the 31st of May 2020. This was achieved at one-seventh of the cost of the Apollo program. Not to take away from America's biggest achievement yet, India is still ahead in the race as they hold the record for launching 104 satellites in a single mission.
India is so good that their costs for the Chandrayaan-2 mission were much cheaper than Hollywood's 2014 sci-fi movie Interstellar that cost $165 million to make, as well as the Hollywood movie about space called Gravity which cost $100 million to make. SpaceX and Blue Origin have their work cut out for them, so far we've been impressed as fans.
Signing off
Data out today includes an EU GDP read and South African unemployment statistics, both for Q1 2020. The Rand edged some more ground against the US Dollar yesterday, now trading at $/R 16.72.
