Kangaroo Jack

Market Scorecard

Last night we lived through a "kangaroo market" with more downs than ups. There was no special reason for the weakness, just the usual cocktail of Covid, inflation and the prospect of tighter monetary policy to come.

In company news, high-end athleisure retailer Lululemon (NASDAQ:LULU) reported strong sales, other than in its Mirror division, which sells a fancy at-home fitness device. Elsewhere, Berkshire Hathaway-backed, Brazil-based Nubank closed up 15% in its market debut, giving it a market capitalisation of $50 billion.

Here are the final, sorry numbers. The JSE All-share dropped by 0.27%, the S&P 500 sagged by 0.72%, and the Nasdaq swooned by 1.71%.

One Thing, From Paul

Ok, it's time for some more unsolicited life-advice. I'm just throwing out a random idea every Friday, so use it or don't use it, I don't mind. This week's suggestion: go to bed early every night.

The results of a new study just published in the European Heart Journal shows that going to sleep between 10pm and 11pm is associated with a lower risk of developing heart disease compared to earlier or later bedtimes.

Researchers tracked nearly 90 000 people between their early 40s and early 70s for sleep time, lifestyle habits and physical ability. They found a 25% higher risk of cardiovascular disease with sleep onset at midnight or later. They also found that going to bed too early could be a problem.

The bottom line: your sleep habits should be consistent, in addition to getting enough shut-eye. This sounds boring, I know, but imagine the health and productivity gains! I have used this method myself for years, coupled with an early morning run.

Byron's Beats

I sometimes wonder if we are doing South Africa a disservice by encouraging our clients to invest their savings offshore. Globally, it's not unusual for people to invest outside of their home country because it gives you access to more diverse investment opportunities.

In South Africa we have exchange controls, so investing offshore is a chore and can feel strange. In reality, exchange controls are an apartheid-era relic. In most countries, you can send money freely, anywhere you like.

I believe we make South Africa a better place to live in, by giving people more investment choices. Our clients get to invest in hard currency and reap the rewards of a thriving US economy. This allows them to stay in South Africa and feel comfortable about their retirement. Market returns have been strong so clients can bring money back, invest in a business, take more risks, or buy a holiday home. That kind of wealth effect will boost our economy.

Anyone providing a good service to South Africans in South Africa is making it a better place. That's true whether you are a doctor, a banker, a lawyer, a secretary or an entrepreneur. So keep at it, knowing that you are making a positive difference just by making a living.

Michael's Musings

At Vestact, we don't pretend to know where the market will go in the short term; there are just too many unknowns. Trying to call short term moves in the stock market is difficult, but predicting currency markets is even harder.

Why has the Rand been weak recently? The Institute of International Finance reported that in late November, non-resident flows to emerging market assets, stocks and bonds, excluding China turned negative for the first time since the start of the pandemic. Basically, more money flowed out of emerging market countries than flowed in.

Here's another possible reason for Rand weakness. Our exchange rate tends to track commodity prices, which were strong earlier in the year but have significantly weakened over the last few months.

I have no idea where the Rand will go next. In January we were at $/R15.50 and now we are around $/R16.00, so not much has changed? Where it goes next will depend on commodity prices, market sentiment towards emerging markets, South Africa's GDP growth rate, and our government's general decisions. It's anyone's guess.

Bright's Banter

Brazilian digital bank Nubank (SA:NUBR33) raised $2.6 billion in its US IPO. At its new $50 billion valuation, Nubank is now Latin America's most valuable financial institution, surpassing Itau Unibanco, which only has a $38 billion market cap.

Nubank was founded by David Velez and Cristina Junqueira in 2013 with $1 million in seed money from Sequoia Capital, where David had spent two years as a partner trying to find an investment in Latin America. He eventually left Sequoia and contacted Cristina, who was at Itau's credit card unit, to help him create Nubank.

Today, the digital bank has more than 48 million clients and operations in Brazil, Mexico, and Colombia. I will be following this one with keen interest because it has lots of potential for growth in Latin America, where opening a bank account can be a mission.

Signing Off

Asian markets are down across the board this morning. China's central bank took steps to limit the Yuan's strength just a day after policymakers raised foreign currency reserve requirement ratio for banks. The Evergrande (HK:3333) debacle is back in the news, which is very boring.

Today, the US will release much-awaited inflation numbers, so you can expect market pundits to be going on about that later today. Next week the Federal Reserve policy-making body will hold a two-day meeting, which may provide clues on the pace of tapering and interest rates increases.

US futures are directionless in early trade, so we will have to wait and see how markets fare later tonight. The Rand is trading at around R16.07 to the US Dollar.

Have a happy Friday and a great weekend, wherever you are.

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