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Procrastination worse than bad luck

Published 2023/10/25, 11:41
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Market scorecard

US markets had a great day yesterday, opening in the green and holding those gains into the close. The S&P 500 ended a five-day slide thanks to good earnings from Coca-Cola (NYSE:KO), General Electric (NYSE:GE) and 3M (NYSE:MMM). So far, over 80% of the 118 companies in the S&P 500 that have issued quarterly numbers have beaten estimates, according to Refinitiv.

In company news, Microsoft (NASDAQ:MSFT) was up 4% in late trade after the enterprise software and cloud giant reported pleasing earnings. Sadly, Google (NASDAQ:GOOGL) dropped 6% after hours because of a slight miss in cloud-computing sales. Visa (NYSE:V)'s results looked fine, and the share price went sideways. Lastly, defence contractor RTX, formerly known as Raytheon (NYSE:RTN), jumped 7.2% on a new share buyback plan.

In summary, the JSE All-share closed up 0.68%, the S&P 500 gained 0.73%, and the Nasdaq was 0.93% higher. Finally!

One thing, from Paul

Market timing doesn't work. Here's an easy-to-read blog post from US brokerage house Schwab that proves the point, again.

Schwab looked at 5 hypothetical long-term investors following very different investment strategies. Each received $2 000 at the beginning of every year for the 20 years ending in 2022 and left the money in the market, as represented by the S&P 500 index.

Peter Perfect was an immaculate market timer. He was incredibly lucky, placing his $2 000 into the market every year at the lowest point.

Ashley Action just dived in, applying the whole $2 000 on the first trading day of the year.

Matthew Monthly divided his annual $2 000 allotment into 12 equal portions, which he invested at the beginning of each month.

Rosie Rotten had astonishingly bad luck, investing her $2 000 each year at the market's peak.

Larry Linger left his money in cash every year and never got around to investing in stocks at all. He read too many horror stories online and was convinced that a big crash was just around the corner. He earned some interest.

The results of the 20-year study are shown in the chart below. Everyone did ok, other than Larry. Ashley's results were the best, given that they required no luck at all. Peter got top spot, but only just. Rosie didn't do too badly, all things considered.

Here are the two main take aways:

Given the impossibility of timing the market, the best strategy for normal people is to invest in stocks when you have the money.

Procrastination is even worse than unlucky timing. Long term, it's almost always better to invest in stocks, even at the worst time each year, than not to invest at all.


Byron's beats

Labour supply is an issue in many developed markets. Amazon (NASDAQ:AMZN) employs over 1.5 million people, which must be a human resource management nightmare. Naturally, they are testing new technologies to increase automation in warehouses to do jobs humans don't like, including the trial of a humanoid robot.

According to Bloomberg, this robot named Digit can squat, bend and grasp items. It's built by Agility Robotics which of course Amazon own a stake in. Amazon has already been using robots for the last ten years, but this is a step-up in functionality.

Amazon are testing another technology called Sequoia (not the VC firm) which can sort inventory and reduce warehouse processing time by 25%. These advancements will help reduce costs and speed up deliveries. Good for Amazon and their clients.

Michael's musings

On Monday, Intel (NASDAQ:INTC)'s share price dropped 3% on the news that Nvidia (NASDAQ:NVDA) is exploring going head-to-head with the CPU maker in the PC market. Intel is currently going through a makeover, trying to re-establish itself as a dominant player in the chip market, so the news came at a bad time for them.

There isn't much overlap in the two company's operations at this point. Nvidia is the king of the GPU market, the complex chips needed to run data-heavy processes like AI or self-driving cars. Intel focuses on CPUs, the central chips that keep stand-alone computers operating.

It's worth noting that Intel missed its opportunity to be a key supplier of smartphone CPUs because their chips aren't very energy efficient. For battery-powered devices, energy usage is important. Apple (NASDAQ:AAPL) eventually ditched Intel for its own internally built CPU chips in MacBooks.

Bloomberg reports unidentified sources saying that Nvidia is teaming up with ARM to build new CPU chips designed to run Windows operated PCs, which could launch in 2025. Nvidia hasn't put a foot wrong for years, so it's understandable that beleaguered Intel shareholders are nervous about this rumour.
Bright's banter

Hermes, the luxury fashion brand known for its high-end Birkin and Kelly handbags, reported strong sales in the third quarter, surpassing expectations and outperforming competitors despite economic challenges. The company's wealthy clientele continued to spend on luxury goods.

The group's consolidated revenue reached EUR10 billion, a 22% increase year-over-year and a 17% increase compared to the same period in 2022. Third-quarter sales came in at EUR3.4 billion, marking a 16% year-on-year increase at constant exchange rates.

The best-performing categories were Leather Goods & Saddlery (up 19%) and Ready-to-Wear & Accessories (up 29%). Watches also did well (up 24%), driven by creativity and exceptional savoir-faire. That's a good French word!

They enjoyed solid performance in different regions: Asia excluding Japan (up 21%), Japan (up 25%), the Americas (up 20%), Europe excluding France (up 20%), and France (up 22%) with no signs of a slowdown in tourist traffic. That number is probably going to sustain into the fourth quarter due to the Rugby World Cup and the Olympics.

The company remains cautious about potential geopolitical impacts on tourism. In mainland China, store traffic continued to rise, especially during July and August, with strong growth across all regions and product categories.

Hermes raised its prices globally by approximately 7% this year to account for higher production costs, with some exceptions for the US and Japan due to currency fluctuations. They will be expanding production capacities in the leather workshop projects in various locations in France.

The company's resilience in a challenging economic environment is positioning it well in the luxury sector, even as some rivals face reduced sales amid rising inflation and uncertainty. Hermes' reputation for offering luxury products still resonates with its clientele. When you are hot, you are hot.

Signing off

Asian markets are pushing higher this morning after the Chinese government stepped up its support for their economy by raising the budget deficit ratio. Benchmarks rose in Hong Kong, Japan, and mainland China, while South Korea went on its own direction.

Earnings season continues today with more large companies reporting. Of most significance to Vestact clients is Meta Platforms (NASDAQ:META). Can they report numbers to justify the 150% increase in share price this year? We hope so.

US equity futures are mixed in early trade. The Rand is trading at around R19.00 to the US Dollar.

Have a good Wednesday.

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