Cannon Asset Managers: Making cents of crazy stupid love

Compiled by Samantha Pauwels & Rynel Moodley

Highlights

The nation of South Africa gathered to watch our President, Jacob Zuma, deliver his state of the nation address last night. As expected, there was no lack of drama as the Economic Freedom Fighters’ (EFF’s) MPs were forcefully removed from the National Assembly and the Democratic Alliance (DA) staged a walkout shortly thereafter. Subsequently, the speech commenced, focussing predominantly on the energy crisis that currently cripples the economy.

The South African rand fell to its weakest level against the dollar in 13 years ahead of the President’s speech, coupled with the Greek and German showdown that is weakening investor appetite for risky assets.Wall Street continues to rise, helped by Apple as it became the first U.S. company worth more than $700 billion!

Finance ministers and central bankers met this week in Turkey for the Group of 20 (G-20) meeting. The Group is faced with a two-speed growth challenge, pushing for structural reform in areas such as trade, education, health, labour and product markets, as well as creating efficient infrastructure.

Graph of the Week: Crazy Stupid LoveHow much do Americans love playing the lottery?

More than they love music, movies, books, video games and sports teams – combined. Last year Americans spent a total of $70.2 billion on lottery tickets – topping $62.7 billion spent on all other different forms of leisure and entertainment as per the adjacent graph.

This shocking figure is exaggerated by the scary statistic that 1 in 4 Americans have saved nothing at all.

Furthermore, more than half of American households have less than one month of income available in readily accessible savings to use in case of an emergency.

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Source: Recording Industry Association of America, Box Office Mojo, NPD, Publishers Weekly, PricewaterhouseCoopers, Graphic: CNNMoney

 

“THERE ARE MANY HARSH LESSONS TO BE LEARNED FROM THE GAMBLING EXPERIENCE, BUT THE HARDEST ONE OF ALL IS THE DIFFERENCE BETWEEN HAVING FUN AND BEING SMART”~ Hunter S. Thompson 

 

Index Index value YTD 1 year 3 year 5 year CurrentPE LT Avg. PE (10yrs) CAPE (7yrs)
JSE All Share 52,508 5.6% 16.6% 68.3% 131.3% 17.8 15.0 17.9
Resources (Resi 10) 44,939 7.2% -17.7% -10.6% 10.1% 11.4 15.5 12.1
Financials (Fini 15) 16,784 7.3% 42.5% 106.8% 183.1% 16.2 13.0 15.0
Industrials (Indi 25) 65,057 4.4% 26.1% 131.7% 254.6% 23.6 16.9 29.0

 

Top 10 Gainers – across the JSE Top 10 Losers – across the JSE
Company/Stock % Chg. Company/Stock % Chg.
1 FORTRESS INCOME FUND 13.1 1 AVENG -15.1
2 NORTHAM PLATINUM 12.3 2 TIGER BRANDS -12.1
3 PEREGRINE HOLDINGS 8.6 3 LONMIN PLC -11.4
4 MONDI PLC 8.1 4 IMPALA PLATINUM HOLDINGS -8.7
5 NEPI 8.0 5 HARMONY GOLD MINING CO -8.0
6 MEDICLINIC INTERNATIONAL 7.9 6 GOLD FIELDS -7.6
7 MONDI LTD 7.7 7 RAUBEX GROUP -6.4
8 REBOSIS PROPERTY FUND 7.2 8 PPC LTD -6.3
9 SUN INTERNATIONAL 6.8 9 ANGLO AMERICAN PLATINUM -6.2
10 SANLAM 6.5 10 WILSON BAYLY HOLMES-OVCON -5.4

 

 

Quote of the Week

“The hard part is discipline, patience, and judgment. Investors need discipline to avoid the many unattractive pitches that are thrown, patience to wait for the right pitch, and judgment to know when it is time to swing.”

                                                                                                                                                                                                                   ~ Seth Klarman

Did you know?

Rather than reducing indebtedness, all major economies today have higher levels of borrowings relative to GDP than they did in 2007. Since the Great Depression, global debt has increased by $57trillion, raising the debt to GDP ratio by 17 percentage points and overtaking world GDP growth. This poses risks to financial stability and threatens global economic growth.

 

THE COMPOUND ANNUAL GROWTH RATE IN THE GLOBAL STOCK OF OUTSTANDING DEBT FROM 2007-2014 IS AS FOLLOWS:

Total: 5.3% Government: 9.3% Corporate: 5.9% Financial: 2.9% Household: 2.8%

 

The McKinsey report pinpoints three areas of emerging risk: the rise of government debt, the continued rise in household debt and the quadrupling of China’s debt since 2007.

Source: McKinsey&Company

Cannon Media
Cannon’s Head of Business Development, Andrew Newell chatted to Business Day TV about his stock pick Adcorp Holdings. Click here to find out more: http://www.businessdaytv.co.za/shows/stockpick/2015/01/27/adcorp

Weekly Highlights
Friday, 06th Nonfarm Payrolls (Jan)|USNonfarm payrolls increased by 257,000 in January compared with a revised gain of 329,000 in December. January marked the 11th straight month of job gains above 200,000, the longest streak since 1994.
Monday, 09th Trade Data (Feb)|ChinaChina’s trade performance slumped in January, with exports falling 3.3 percent from a year-ago while imports tumbled 19.9 percent, far worse than analysts had expected. China posted a record monthly trade surplus of $60 billion.
Tuesday, 10th Unemployment Rate (4Q14)| SAThe unemployment rate dropped 1.1 percentage points to 24.3 percent in the fourth quarter of 2014. Markets were anticipating the rate to increase to 25.6%.
Wednesday, 11th Budget Deficit (Jan)|USThe deficit widened slightly in January partly due to higher spending on government healthcare services for low income households. The government ran an $18bn deficit relative to expectations for a $10bn deficit.
Thursday, 12th Mining Production (Dec)| SAMining production decreased 2 percent year-on-year from a revised year-on-year drop of 0.1 percent in November. The main contributors to the decrease were iron ore, platinum group metals and diamonds.

 

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