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Jun 19, 2019

Simon Shares

  • Old Mutual (JSE code: OMU) has fired suspended CEO Peter Moyo and detailed what went wrong. The short version is that the company Moyo founded (NMT group), was CEO of and chair since taking up CEO at Old Mutual paid two dividends when they should in the first instance paid Old Mutual as a preference shareholder a dividend and in the second instance they paid when they should have first paid off the preference shareholder - Old Mutual. Moyo has fired back with a lawyers letter stating that Old Mutual is wrong and in fact their representative on the board voted in favour of both dividends. Who's right? I have no idea and ultimately the courts will decide, or more likely the parties will settle. So for now it is about money and how much Moyo gets. The good news for Old Mutual shareholders is that this is not an operational issue, but they do now need a new CEO.
  • Metrofile* (JSE code: MFL) have restructured their debt that cost two CFOs their jobs. The new debt will see the tax rate revert back to the normal 28% instead of the crazy 40% in the last results. The new debt is at about the same rate, but this will decrease in time as the debt reduces. The impact won't be felt much in the current results due for end June, but the full impact for FY 2020 could boost HEPS by as much as 15%.
  • Facebook launches their stablecoin ~ Libra. Lots of excitement as the theory is that it'll remove fees for money transactions. But it won't, sure it may reduce them but Facebook is doing this because they want a slice of the global multi-billion dollar movement of money, especially remittances home.
  • San Francisco has become the first city to ban e-cigarettes, and nobody should be surprised. The tobacco industry was losing ground in the major developed markets, regulators were happy and the industry was content as they upped prices (and hence margins) and moved demand eastwards to less regulated markets. But then e-cigarettes arrived and the industry thought they have their savior and jumped on the bus and right into the regulators hands. Smoking started to increase, especially amongst teens and now the regulators are coming for big tobacco again. Banning e-cigarettes, likely banning flavoured cigarettes (such as the biggest seller, menthol). In short the tobacco industry has shot themselves in the foot and should have kept their head down instead they now in trouble again. A last point here is not about whether e-cigarettes are safer or not. They are a tobacco delivery system and a potential gateway to normal cigarettes and regulators want neither of these.
  • USA ETFs
  • Upcoming events;

* I hold ungeared positions.


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The Rand blame game

I have a watch list of EM currencies, and they move. They move a lot. Some times in sync with each other, at other times just crazy all over the place.

But you will notice every time the Rand weakens the local politicians get blamed. Well what about when it strengthens? Tuesday saw it as the best preforming EM currency as it gained some 2% to 1450c. The truth is politicians have a lot less influence on the currency than they like to believe and then we give them credit for. The Rand moves and is also the preferred EM currency to trade due to its liquidity.

Sure when Ace Magashule talks about 'quantity easing' that's easy to pin the sudden Rand weakness on him. But for the vast majority of the time nobody actually has a clue and blaming the general grouping of politicians is easy - but lazy. Especially if we're not offering credit to them when it strengthens.

I also wonder about our countries obsession with the currency. I do think it's fair enough as it is, over the longer-term, a kind of vote on the country in that it tells us if money is flowing in or out. It also directly hits our pocket in the form of the petrol price. But do other EM countries have the same level of obsession? Anybody have any experience from traveling abroad?

But most often when the Rand moves nobody really has any idea as to why. So I asked Twitter and the range of responses shows that really nobody knows.

 


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