Lemonade Stand

Market Scorecard

It was a mixed day for markets yesterday. The day started off in the red, apparently due to negativity around an increase in infections in the US. The fear is that this second wave of infections will result in a new lockdown or slow the lifting of the current lockdown restrictions. Yesterday, the US had a record number of new infections and South Africa saw 6 579 new infections, our deaths are now sitting on about 100 per day.

As the trading day progressed though, the US market swung into the green. Financial media speculate that the swing was due to the expectation of increased stimulus from central banks. As Paul speaks about in Blunders below, short-term market moves are rather random.

Yesterday the JSE All-share closed down 0.98%, the S&P 500 closed up 1.10%, and the Nasdaq closed up 1.09%.

One thing, from Paul

I'm fascinated by the evolving relationship between the US and China, the first and second most important countries on the planet. Up until the end of the Obama era, the US encouraged China's economic evolution on the assumption that a burgeoning consumer market there would accelerate global growth, and Chinese manufacturing would lower costs and reduce inflation worldwide.

I'm a committed globalist, and in my view competition between nation states is absurd and idiotic. We are one species, humanity. We advance together.

Under the Trump administration, US policy towards China has been the exact opposite of what is sensible. I find that deeply disappointing. The US could have played to its strengths, providing technological and policy leadership, rather than seeking to set China up as a rival, start trade wars and restrict immigration.

Just listen to these comments, they make me want to weep.

President George H.W. Bush: "As people have commercial incentives, whether it's in China or other totalitarian systems, the move to democracy becomes inexorable."

President Bill Clinton: "By joining the World Trade Organisation, China is not simply agreeing to import more of our products, it is agreeing to import one of democracy's most cherished values, economic freedom. The more China liberalizes its economy, the more fully it will liberate the potential of its people. The genie of freedom will not go back into the bottle."

President George W. Bush: "The case for trade is not just monetary, but moral. Economic freedom creates the habits of liberty, and habits of liberty create expectations of democracy."

Secretary of State Hillary Clinton: "The fact is that a thriving America is good for China and a thriving China is good for America."

Compare those comments with these ones.

President Donald Trump: "The concept of global warming was created by and for the Chinese in order to make US manufacturing non-competitive".

President Donald Trump: "We can't continue to allow China to rape our country, and that's what they're doing. It's the greatest theft in the history of the world".

If this topic is of interest, read this article by Orville Schell in The Wire China. The Death of Engagement

Byron's Beats

The nice thing about having big tech companies, with too much cash, is that they can be more adventurous with their investments. These investments have the potential to change lives, communities and possibly the world if they are really successful.

Google has an exciting programme that invests in startups in Africa. Ventureburn covers the 5th edition of Google for their Startups Africa program in this article.

Since 2017, the programme has worked with 47 startups in 17 African countries. This year they plan on backing 20 startups, an increase from 12 in 2019 - 8 are from Nigeria, 6 from Kenya, 2 from RSA and then 1 each from Ghana, Tunisia, Ethiopia and Zimbabwe.

The two South African businesses are a Fintech investments app called Franc and a mobile visual effects app called Beamm.

Let's hope something really big comes out of this one day.

Michael's Musings

We have spoken many times about how the lockdown will change the way we work. Most of the discussion has been around more employees working from home; many may never formally go back to the office. I think the conversation has not gone far enough though.

Many companies actually saw a productivity spike during the lockdown. It does make sense, not wasting time in traffic or getting distracted at the water cooler, means that you have more time to work. Another element of this though is that when people are left alone, they get to work at their own pace. There is less dead time, sitting around, pretending to work just to make a good impression on the boss.

To me, it reinforces the idea of moving to a four-day workweek. It shows that working in an unstructured way as a knowledge worker is more productive than being stuck in an office during standard work hours. In four days, we will be able to get the same amount of work done, as we did sitting in an office for five days.

Part of the reason that the US adopted the 2-day weekend in 1932 was to help combat unemployment during the great depression. The more free time people have, the more time they have to spend their money on things. Maybe one solution to stimulate the economy post-lockdown is to move to a 3-day weekend?

Bright's Banter

Lemonade is a startup backed by a venture capital firm called General Catalyst and SoftBank which offers homeowners and renters' insurance in the US as well as contents and liability insurance in Germany and the Netherlands. The New York-based company fetched a valuation north of $2 billion in the last round of financing in April 2019 where it raised $300 million.

The online home insurance company has filed for an initial public offering (IPO) in the US, planning to raise about $100 million. The insurer reported $26 million in revenues for the first quarter of 2020, up from $11 million in the first quarter of 2019. Losses widened to $36.5 million for the quarter, from $21.6 million last year.

Lemonade is comparable to Pineapple in the local context, where you insure your widgets by taking photos of them using their mobile app and then filling up a short questionnaire on the item. However, Lemonade is a public benefit company and has pledged to donate excess profits to charity. Effectively, Lemonade takes a fee per transaction, and then the rest of the money is either paid out in claims or given to charity. It helps them to avoid fraudulent claims.

I think this company will be a hit with Millennials and Generation Z as it's such a convenient way to insure your items, but also because of the social impact aspect of doing good. Their ad slogans include "We Love Insurance" which they've repeated in the filing, and their goal is to be "the world's most loved insurance company."

Signing off

ECB president, Christine Lagarde will be speaking at a business leaders, online summit. We might see volatility in the Euro based on some of her comments. As the US market improved, the price of oil moved higher and the Rand strengthened, currently trading at $/R 17.14.

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