The Ingham Analytics Weekly Letter on Sunday - 17 January 2021

Sunday, 17 January 2021

Welcome to our Ingham Analytics Weekly Letter on Sunday. As always, we take a step back to see wood for trees, in South Africa and around the world - with a mix of irony, humour and say it like it is. 

We're a fortnight in to 2021 and, as we wrote in "2020 Redux?" this week, 2020 has already been brought back. We also issued "Saxo's outrageous predictions for 2021 and our take" this week too - a follow up to our note last year entitled "Saxo's electrifying message" which was one of the most popular downloads by our valued readers.

Thank you to those readers who take the trouble to contact us via the website, we value your mails, almost all of which are thoughtful, kind and constructive. We deliberately chose not to have a have a social media outlet for Ingham Analytics and therefore no Twitter, WhatsApp, Facebook or other "tech" tool for engagement - most of which in other forums are anything but constructive. But for those that do reach out we'll reply directly to you in person in recognition of your feedback and our appreciation thereof.

Talking of which, social media is all aflutter, twittering about WhatsApp's privacy policy that seemingly has driven messaging users to rival Telegram. And with the outgoing US President being removed from the Twitter site we estimate that he singlehandedly accounted for over 5% of the value of the social networking service. Twitter stock is around 20% lower than at the start of the year as of Friday.

A bit of social media trivia. Mr Obama was the first US president to have an official Twitter account with @POTUS established in 2015 when the erstwhile US president was a relatively youthful 54 years old. On 20 January at just after midnight eastern standard time Mr Biden will inherit the handle, starting with a zero-follower base. Mr Trump tended not to use the official handle, preferring his own private one.

Late last year we wrote that the COVID-19 pandemic was the best thing that ever happened to online infotech giants like Facebook, Google, Microsoft and Twitter. So too were Mr Trump's four years in the White House a boon - the Facebook user base has climbed 50% under his presidency and sales have doubled; Twitter now makes a profit, outrageous as that old-fashioned notion may seem when a stock like Airbnb loses tons of the folding stuff and commands a $100 billion market capitalisation. US corporate tax rates were lowered and profits outside the US attracted no tax to speak of.

But we also cautioned that regulatory scrutiny could upset the tech apple cart with the aim being to reduce their market, political and social power. If old fashioned valuation tools didn't stack up in trying to fathom mind-numbing stock ratings, then a dose of antitrust ammonium carbonate may just be the antidote to bring them down to earth. Saxo in their outrageous predictions recommend shorting tech companies like AMZN, FB, GOOGL and MSFT and, as we point out, after the tech bubble of 2020 this isn't a bad call as we see little motivation for new money at elevated multiples.

For those of you following the Santam self-inflicted reputation train wreck we note the English Supreme Court ruling on Friday that insurers must pay out disputed claims related to the coronavirus to businesses. This we think will set a precedent for other countries that follow English legal precedent closely and to which law many companies internationally turn for the drawing up of contracts that can be enforceable in the English courts. The English High Court had already ruled in favour of policyholders - sensibly and rightly so in our view, now upheld on appeal.

England's Financial Conduct Authority brought the insurance test case to resolve uncertainties surrounding business-interruption coverage. This process was undertaken expeditiously given the gravity of the COVID-19 situation on business and is testament to the excellence of British jurisprudence. Good show chaps, those dastardly short-term insurers will be getting focal dystonia such is the number of cheques they'll need to sign off on.

The sheer decrepitude of the ANC as a laughably termed "governing" political party was again laid bare this week in an all-too-rare interview with South Africa's president-of-nothing-in-absentia. The Radio 702 journalists partially departed from the fawning yes sir, no sir we're used to.

At least an admission - the larder is empty, "we do not have the money." You don't say, but squirrel-in-chief gets a salary and perquisites higher than the prime ministers of several rich, well-governed countries, despite pretending to head a kleptocracy with a small gross domestic product that has halved in world rankings in 26 years and with it a decline in income per head of population, the quantum of which is up 50%.

This political ineptitude has real economic consequences. As we've said before, the JSE is uninvestable and the woeful state of the dwindling number domestic-facing companies that are still listed tells a tale of accelerating economic and social decay. Last Thursday, Cartrack, a rare local success, told us it is off to the Nasdaq stock market in the US - we wish you all the best as you expand to parts of the world where entrepreneurship is valued rather than penalised. Maybe Elon Musk, another emigrant, will buy you.

If you are eyeing something to buy this year British private equity firm Permira said this week it is considering the listing of iconic English footwear brand Dr Martens on the London Stock Exchange. Those of us with grey in the anatomical temples will relate to Doc Martens as an anti-establishment, punk-rock, head-bang era well-made pair of shoes. "London Calling" by the Clash ("I live by the river") is a musical metaphor of these shoes.

Dr Martens is a successful company. Sales are around $1 billion and the profit margin last year exceeded 20% so suggesting $200 million. Online sales are 30% and rising quickly - a pandemic trend. A value of GBP4 billion or more is mooted.

"Should I stay or should I go" said the Clash, our answer is let's go, yeah mate!

The proposed listing of iconic English footwear brand Doc Martens is the head-banging deal for us this week.


 

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