Market scorecard
US markets softened last night, as trading resumed after a long weekend. Federal Reserve Governor Christopher Waller made a speech in which he mentioned the possibility of a rate cut, but only later in the year if inflation approaches the central bank's target. He said he and his colleagues would act "methodically and carefully."
In company news, Morgan Stanley dropped by 4% after warning about lower margins in their wealth management business, while Goldman Sachs rose by 0.7% as its profit surpassed estimates. Elsewhere, Boeing (NYSE:BA) buckled by another 7.9% because of an analyst downgrade. Lastly, Apple (NASDAQ:AAPL) slipped 1.2% after the US Supreme Court declined to consider its appeal in an antitrust lawsuit challenging pricing policies in the App Store.
At the close, the JSE All-share was down 0.91%, the S&P 500 gave up 0.37%, and the Nasdaq was 0.19% lower.
One thing, from Paul
I'm working up to my review of 2023 by giving away all my main points in the days leading up to that message.
The Vestact model portfolio in New York enjoyed a 52.9% gain last year, which is more than double that of our benchmark, the S&P 500, which only went up by 24.2%.
We are very happy about that, because according to research by S&P itself, 59% of US large-cap equity fund managers underperformed the S&P 500 during the first half of 2023. Most of them probably went further downhill in the second half, because they tend to panic and sell low, and then get greedy later and buy high. We just stay invested.
This follows 13 consecutive years in which the overwhelming majority of fund managers in this category have lagged the index. In other words, most professional investors are unable to beat the market. Over the last decade Vestact portfolios went up 16.2% each year (on average after fees) versus 9.9% for the S&P 500. We are much more resilient than most managers.
Byron's beats
The safety of flying is a fascinating topic. After the recent Boeing 737 incident, it was all over the news again. Felix Salmon from Axios made a very good point in a column recently.
"Last Friday, January 5, the day a door plug flew off an Alaska Airlines airplane in mid-flight, was a day in which approximately 120 Americans died in motor vehicle crashes. Roughly 136 died from opioids. Perhaps 150 died as hospital inpatients due to preventable medical errors. About 230 died of Covid-19. And zero died in aircraft accidents".
He goes on to say that because flying is so dangerous, the industry has always been obsessed with safety. Frankly, it's the only industry on the planet that takes the issue so seriously.
This is why I find it ironic that there is so much scrutiny of self-driving cars. Motor vehicles are already unsafe and you are forced to trust other volatile humans behind the wheel. Give me AI-controlled software over a Joburg driver scrolling Instagram in between traffic lights any day!
Michael's musings
De Beers recently concluded its first of 10 rough diamond sales of the year, and according to insiders, it wasn't pretty. They were forced to cut prices by at least 10%, and by 25% in the crucial category of stones used for engagement rings. De Beers isn't as influential as it used to be, but still sells about 10% of the world's rough diamonds.
These 10 De Beers sales are only open to pre-approved contract buyers, a throwback to when they totally dominated the market. They decide the quantity, quality and price of each box that the buyers are offered. The buyer can then decide to take the lot or walk away. If they walk away from too many offers, they will lose their accreditation.
Diamond prices are falling even as some large producers are reducing supply. Fewer people getting married, a desire to have non-diamond jewellery and synthetic diamonds are all contributing to the pressure on mined diamond prices. I guess diamonds aren't forever?
Bright's banter
TikTok, owned by ByteDance, has become the fastest social media app to surpass $10 billion in cumulative consumer spending. The popularity of video-streaming platforms like TikTok and Disney+ contributed to an 11% rise in consumer app sales in 2023.
The traditional leaders are gaming apps, but they faced a double-digit sales decline in China, resulting in a 2% global drop.
TikTok's in-app purchases, particularly credits used to tip creators and live streamers, played a significant role in its revenue generation. The success of TikTok has unlocked new monetisation pathways in the mobile app space, with a focus on in-app purchases beyond advertising.
Data.ai estimates that direct consumer monetisation in social apps through in-app purchases will grow 150% to $1.3 billion in 2024. Overall, spending in-app (excluding games) increased as users spent more on streaming, user-generated content, and dating apps.
Signing off
Asian markets are mostly down this morning with Hong Kong-listed Chinese shares leading the decline. Benchmarks also fell in India, mainland China, and South Korea. Only the Japanese market continued to defy all odds thanks partly to its weakened currency.
Data out revealed that while China achieved its economic goals for 2023, the country's housing market experienced a deepening slump, and domestic demand for goods continued to remain weak.
US equity futures have edged lower in early trade. The Rand has weakened again to around R18.94 to the US Dollar.
Earnings season continues on Wall Street today, with some secondary financial companies like Charles Schwab (NYSE:SCHW) and US Bancorp (NYSE:USB) out with quarterly numbers.
Enjoy the day. Goodbye.