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Setting a president

Published 2024/04/16, 13:52

Market scorecard

US markets went down sharply yesterday after retail sales exceeded forecasts. Robust consumer demand continues to drive a strong economy, but that lessens the chances of interest rate cuts. The S&P 500 dropped by over 1% to reach its lowest level in nearly two months. On the plus side, banks performed well following a surprisingly strong profit announcement from Goldman Sachs.

In company news, Tesla (NASDAQ:TSLA) fell by 5.6% after announcing a layoff of 10% of its workforce. Elsewhere, Goldman Sachs (NYSE:GS) was up 2.9%. Salesforce (NYSE:CRM) slumped by 7.3% on that story yesterday about its plans to buy Informatica.

At the close, the JSE All-share was 1.05% lower, the S&P 500 lost another 1.20%, and the Nasdaq sagged by 1.79%. Ouch.

One thing, from Paul

Betting markets currently assume that Donald Trump has an even chance of winning the November election. After trailing for months, Joe Biden has moved slightly ahead on Predictit. On Betfair, Trump still has a 1 point advantage.

So far, the market doesn't seem to care, either way. Both candidates are known quantities.

Here's a fascinating stat, from this article in the New York Times:

"Starting with the Eisenhower administration in 1953, if you had put $1 000 into the S&P 500 and kept it there only during Republican administrations, through March 20 it would have been worth $27 400. If you had invested only during Democratic administrations, your stake would have been $61 800.

But if you had just held your nose when you found a particular president repugnant and held on all the way through, you would have had $1.69 million."

Holy Moses! Please keep that in mind and stay put, hold on to your blue chip shares, and keep adding to your account, regardless of how this election unfolds.

Byron's beats

Despite very solid economic growth, the US economy has used roughly the same amount of electricity per annum since 2010. This is thanks to our ability to do more with less. All of our electrical devices are more efficient.

However, now that more electric vehicles and data centres are coming online, electricity demand is expected to increase by 15% by 2030. EVs require electrical charging, but we are using less oil. A bit of a zero-sum game. We win only if the electricity used to power the vehicle is renewable.

As for data centres, I believe we need to consume more electricity in the interest of progress. Many of these centres are built by big tech companies who have more than enough capital (and a social obligation) to power these centres on renewable energy. According to Finimize, 97% of new data centre projects will be powered by renewable energy.

This energy transition is exciting to watch!

Michael's musings

Did you hear about Vietnamese businesswoman, Truong My Lan, who was found guilty of embezzlement, bribery and violations of banking rules last week? A Vietnamese court sentenced her to death for her role in a $12.5 billion financial fraud. Wow.

Vietnam is taking the stance that large-scale financial crimes are just as serious as violent crimes. I agree with that. These far-reaching white-collar crimes usually have many victims, and in some cases, leave families financially destitute.

Imagine how things would change in South Africa if there were more prosecutions for financial crimes, and the guilty parties were sentenced to very harsh punishments. Frustratingly, we spent over a billion Rand on the Zondo Commission, but nothing significant has happened since then. Also, there was a lack of action when Steinhoff's house of cards came tumbling down.

Bright's banter

ByteDance, the company behind TikTok, is trading very well, despite facing its greatest existential threat ever - a potential ban in the US or a forced sale. The social media giant saw its profits soar by about 60% in 2023, surpassing rivals like Tencent (HK:0700) and Alibaba (NYSE:BABA).

Profits were over $40 billion and with sales nearly reaching $120 billion, ByteDance became one of the fastest-growing tech giants of 2023. Its success was driven by TikTok's global popularity and expansion into e-commerce.

In China, ByteDance's platform Douyin is challenging Tencent's dominance by evolving into a multifunctional platform. Internationally, TikTok's launch of TikTok Shop has boosted revenue beyond digital marketing.

The company was recently valued at around $250 billion, meaning its enterprise value to EBITDA is around 6x, Tencent's is roughly at 12x, Alphabet (NASDAQ:GOOGL) is 20x, and Meta (NASDAQ:META) is 22x. Liquidity and geopolitical tensions could be why ByteDance looks very cheap on a relative basis.

Signing off

Asian markets continued to tumble across the board this morning with the MSCI Asia-Pacific index sliding the most in three months. Benchmarks fell in India, Hong Kong, Japan, mainland China and South Korea.

Here at home, Barloworld (JO:BAWJ) saw its shares jump after hinting at discussions that could shake up its trajectory. While the company didn't spill the beans on what these talks are about, it warned shareholders to tread carefully until the details are released. The stock rose by as much as 11.2% intraday, and closed with a whopping gain of 10.3% at R79.54.

US equity futures have edged lower pre-market. The Rand is trading at around R19.03 to the Dollar as emerging market currencies fell to fresh lows for the year.

UnitedHealth (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), Bank of America (NYSE:BAC), and Morgan Stanley (NYSE:MS) report their first quarter numbers before the market opens today.

It's gloomy in Johannesburg today. Stay warm out there.

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