Silver Is Winning

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The world of finance is never a dull place. Financial journalists are still putting their finishing touches to opinion pieces on GameStop (NYSE: GME ), Wall Street vs the little guy, but the market has already moved on. GameStop was January news, we are now in February. The focus this week is on Silver .

Towards the end of last week, r/WallStreetBets subreddit turned its attention to silver and the metal price started to climb. Yesterday, demand went through the roof, pushing the price to an 8 year high. It seems like Wall Street and Main Street are jumping on this trade, in anticipation of other people following. A self-fulfilling prophecy of sorts. Where will the price settle? Who knows. At this point it is being run on pure emotion, overriding any fundamentals. Emotions dwindle though, and the bedrock of fundamentals will come through.

This is a perfect example of Benjamin Graham's quote: "In the short run, the market is a voting machine but in the long run, it is a weighing machine".

Yesterday the JSE All-share closed up 0.52%, the S&P 500 closed up 1.61%, and the Nasdaq closed up 2.55%.

Michael's Musings

Visa (NYSE: V ) is another company where the "share price hasn't done anything" recently. In fact, over the last 12 months, it has gone backwards. Its 52 week high is $220 and it is currently trading around $195 a share.

Intuitively, having a pandemic where people shop more online and try to avoid cash in their everyday lives should be good for Visa? From that perspective, Visa has done well. Over the last year their total volumes increased by 5%.

A big money spinner for Visa is their cross-border transactions - big margins involved in connecting banks from different countries. They had 22% fewer cross-border transactions due to lower tourism, meaning a 28% drop in that division's revenue. Interestingly, Visa saw an increase in transactions between the US and Mexico, and the US and the Caribbean. Americans looking for sunny places to spend their Winter break?

Covid has pushed more people online and away from cash. We don't see that trend changing once the world goes back to normal. What will change though is a rebound to pre-pandemic levels of cross-border spending. The Visa share price has taken a pause due to a temporary drop in profits. Management is using these lower share prices and super low interest rates to buy back $8 billion worth of Visa stock. You should also be buying.

One Thing, From Paul

Last week the US market fell sharply. Yesterday (Monday) it went up a lot. Anyone trying to time the market, by nipping in and out is getting killed. When it comes to short-term market sentiment, it's just impossible to know what's about to happen next.

I was reading an article in the Wall Street Journal over the weekend that referenced a new study, that confirmed that active traders assume much more risk, and then end up with lower returns. What a bum deal!

The research from Ilia Dichev of Emory University and Xin Zheng of University of British Columbia, explores the connection between active trading and risk. They found that active investors thought that they were chasing safe winners, but they mostly ended up owning risky losers. On average, they assume much more risk to get lower returns. I suspect that GameStop will end up this way, mark my words. As always, it's better to buy well and then stay long and strong.

A New Reason Investors Shouldn't Try to Time the Stock Market. Moving in and out of stocks not only lowers returns, it adds to volatility, according to a new study.

Byron's Beats

Behind the scenes, entrepreneurs in South Africa are working really hard to create the next scalable business. Especially in the FinTech space. There is an incubator program set up by AlphaCode (an RMI subsidiary) which has picked 10 businesses that will go through an intense 6 month program that includes funding and training.

What impressed me the most, was the original ideas that these businesses were implementing. Take a look at the article below which gives a brief summary of each business.

From an e-marketplace for smallholding farmers (AgriCool) to a platform for sportsman to leverage their brand (MatchKit). The South African fintech space is alive!

Bright's Banter

My colleague Byron wrote about Apple (NASDAQ: AAPL )'s record-breaking quarter where iPhone sales topped all imaginable expectations. This helped the company make over $111 billion in revenues for the first time in its history - the iPhone 12 is estimated to have shipped over 90 million units.

What is even more impressive is that Apple managed to churn out these numbers during a tough pandemic. The company posted strong results across all their products. In percentage terms, the iPhone with of 17% growth, didn't grow as much as the rest of the basket.

The infographic below shows Apple's quarterly revenues by product category. Apple iPhone still contributes around 60% of all revenues, followed by services. A special mention to the iPad which made a strong comeback!

Signing Off

Beaches and booze are back, along with our first 1 million doses of the vaccine. Data out today includes the EU's 2020 GDP read, where the block is expected to contract by 4.3%. As we mentioned yesterday, it is the last big earnings day for this season as Amazon (NASDAQ: AMZN ), Alibaba (NYSE: BABA ), Alphabet (NASDAQ: GOOGL ) and Amgen (NASDAQ: AMGN ) all report their latest numbers. Asian markets are green this morning and the Rand is slightly stronger, now trading at $/R15.01.

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