Market Scorecard
The US market sank on Friday as "risk-off" sentiment continued to ripple through markets. The S&P 500 fell 1.2% for the week, while the Nasdaq was lower by 2.6% for the same period. This resulted in the biggest two-week decline since March. If you bought stocks recently, our apologies.
Friday's monthly jobs report showed that employers added 210 000 new jobs in November, below the 573 000 economists expected. Despite slower hiring in most sectors, the good news is that the unemployment rate fell to 4.2% as the share of people looking for work dropped. In other words, this was a mixed report, with some positive signs for the US economy.
In company news, Zillow (NASDAQ:ZG) rose by 10% after the online real estate market site announced a share buyback programme. Elsewhere, DocuSign (NASDAQ:DOCU) plunged by 42% after the e-signature software company released earnings showing weakening demand, well below expectations.
For the record, on Friday the JSE All-share was down 0.30%, the S&P 500 fell 0.84%, and the Nasdaq lost 1.92%.
One Thing, From Paul
Michael wrote a few days ago about why we stick to providing investment services in New York only. I spotted this extra fact last week, in an article in the FT, which I found amazing:
"All European bourses are more or less moribund, relatively speaking. Daily volumes so far in 2021 have averaged $554 billion in the US, $174 billion in China and $47 billion in Europe."
"The biggest US stocks each now trade more than the largest European markets. Apple (NASDAQ:AAPL) trades $12 billion per day and Tesla (NASDAQ:TSLA) $21 billion a day compared with the Euronext exchange (PA:ENX) at $8.1 billion a day in total and the London Stock Exchange (LON:LSEG) just $6.1 billion."
For reference purposes, the daily turnover of the JSE is about R50 billion, on a good day. That's about $3 billion.
Byron's Beats
The market is very smart, sometimes you only see this once it has been proven correct. A good example of this was the fast recovery last year which happened in the middle of the worst lockdowns. This can also be applied to individual stocks.
There is no doubt that Alibaba (NYSE:BABA) is a great business. But it has always traded at a big discount to its Western rival Amazon (NASDAQ:AMZN) because of "Chinese risk". After hearing that rationale for so many years, one can easily brush it off as a lazy explanation.
Now, that risk has become a reality. Alibaba peaked in October last year at $304 a share, just before its financial arm Ant group was about to list. Then the Chinese government halted the listing at the last minute, and it's been downhill from there. The stock is now trading at $111 per share. The market did not know this would happen, but it certainly factored the risk into the price.
Michael's Musings
I've only recently bought a generator for my house. The power lines between the substation and my road are a patchwork of temporary, and now permanent, repairs. It means that one of the lines fails every month or so, and then I'm without power for 24 - 48 hours. Before that, I only had a battery backup for my wifi. Loadshedding is frustrating, but it's even worse if you don't have access to the internet! No internet means I can't work, I can't scroll through social media, I can't watch Netflix (NASDAQ:NFLX) and I can't find the random fact which comes up during dinner conversation.
The internet is up there with food and shelter when it comes to basic needs. Imagine being one of the 2.9 billion people who still don't have access to the internet. Up until 2018, more than half the world's population was offline. That's crazy!
One of the reasons we are still comfortable buying technology companies is that there are still so many people who don't use their products. As more people go online, these companies become more valuable.
For South Africa, the estimate is that only 60% of the population has internet access. In a country with more cellphones than people, I assume that the high cost of connectivity is a bigger barrier than access to a network. Given the centrality of the internet to a modern economy, I'm surprised that there hasn't been more uproar over the government's mismanagement of the spectrum allocation process, which is one of the causes of high internet costs in South Africa. I think one of the most effective ways to help someone get out of poverty is to assist them in getting access to affordable and reliable internet.
Infographic courtesy of: Statista
Bright's Banter
FTX is looking to raise $1.5 billion in its latest round of funding, valuing the company at $32 billion. This is less than six weeks after the crypto-derivative exchange raised $421 million in a Series B-1 funding round at a valuation of $25 billion.
FTX was founded in May 2019 by Sam Bankman-Fried after his stint at Jane Street Capital, trading global ETFs. He saw a big gap for lucrative arbitrage opportunities in the crypto world and decided to launch FTX to meet that need.
The company will use the funds to make a series of acquisitions and partnerships to get FTX into more countries, and increase its active user base.
Signing Off
Asian markets seem to be down this morning, across the board. There are rumours in Beijing that the Chinese central bank will soon ease monetary policy to aid growth.
However, US equity futures are pushing higher in early trade. The Rand is trading at R16.05 against the greenback.
May your clothes be comfy, your coffee be strong, and your Monday be short.