Hit The Road Hack

Market Scorecard

Yesterday, US markets shot up as Fed Chair Jerome Powell testified to lawmakers. He sounded measured on increasing interest rates and vigilant on inflation, saying he would propose a quarter-percentage point rate increase at the next Fed meeting. Some analysts expected a half a percent rise, making the news of a slower increase well received. The advances in the market were broad-based, with ten of the S&P 500's eleven sectors rising 1% or more, while five rose more than 2%.

In company news, Nordstrom (NYSE:JWN) shares jumped 38% after the retailer projected stronger-than-expected earnings for the 2022 financial year. Elsewhere, Hewlett Packard also raised its earnings forecast for the year, lifting those shares by 10%.

In summary, the JSE All-share closed up 0.55%, the S&P 500 rose 1.86%, and the Nasdaq increased by 1.62%.

One Thing, From Paul

Here's a touching story about a person called Eppie Thompson, who quit her finance job in the City of London and set up her own business, selling embroidery kits.

Here she is: "My main aim in life, whether with sewing or through any other medium, is to try and inspire others to get making too."

The business is called Fabled Thread and she launched it from her East London flat. Now she's in a big studio and her sales are booming. She pays a lot of attention to how her products make her customers feel. She's all about the "healing, nourishing lift that making art with your own hands gives to the soul". She has a great Instagram page too.

This account of her success is quite uplifting.

Byron's Beats

Commodities have had a great run. This has been a huge tailwind for the South African fiscus and many investors have made good money.

Calling the commodities cycle is a tough business. The miners work very hard to extract minerals as cheaply and efficiently as possible. When prices are high they pump up supply, but their clients look for alternatives or recycled product. All of these things ironically works against the price of commodities. The more ingenuity in the sector, the more supply there is. Going long commodities is almost a bet against progress.

We like to look at sectors with a multi-decade time horizon. The commodities cycles are usually much shorter than that. When you are in the trough, it is really rough. Remember when Anglo tried to sell Kumba for less than the price of its annual dividend two years later? Luckily no one bit.

We are "time in the market" investors, not "timing" the market. We are happy to watch the cycle play out from the sidelines. My general bias though is towards progress which will result in too much supply, plenty of alternatives and more efficient use of minerals which will bring down demand.


Michael's Musings

The commodity sector is not the only place benefitting from the Russian war; cybersecurity is flying too. In modern warfare, someone with a laptop can be more effective than a team of soldiers in a tank.

Since Covid stopped making the headlines last week, CrowdStrike is up over 20%. Russia is known for having potent hackers, and any company associated with a country putting sanctions on Russia could be a target. If companies were slow to upgrade security in the past, there is new impetuous now.

Last week, a key Toyota supplier was hacked, forcing Toyota to pause all Japanese production for a day. It resulted in the lost production of 13 000 cars! Companies can no longer skimp on protecting their digital assets. CrowdStrike is one of the industry leaders in cybersecurity and our horse in this race.


Bright's Banter

VALR managed to raise $50 million in a Series B funding round led by Pantera Capital with participation from Alameda Research, Coinbase (NASDAQ:COIN) Ventures and others. The funding values the South African crypto exchange at north of $240 million, more than 10 times its valuation in July 2020.

The VALR platform was co-founded by Farzam Ehsani in 2019 with a view of being the biggest exchange in Africa. So far, the company has done well by offering Bitcoin as well as 60 other cryptocurrencies to over 250 000 retail customers in Mzansi, and 500 institutional clients.

The company plans to bring in more institutional clients from the traditional finance system and expand into other markets, including India. I've used their app before and I have to say it's a world-class, user-friendly platform comparable to Coinbase and better than some of the global exchanges out there.


Signing Off

Asian markets are up this morning, led by Japan and South Korea. Tomorrow the US will release its unemployment data as well as non-farm payrolls.

US equity futures are steady in early trade. The Rand has weakened to around R15.34 against the US Dollar.

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