Market scorecard
US markets ended Friday on a positive note, which is just as well because it was a horrible week. The PCE inflation index showed its slowest annual rise since early 2021 at 2.6% year-on-year. Consumer spending dropped 0.5%, which is a little concerning. Both the S&P 500 and Nasdaq gained, with all sectors closing in the green, helping to ease February's losses.
In company news, Rocket Lab has pushed back the launch of its Neutron rocket to the second half of the year and issued a first-quarter revenue forecast that missed expectations. It's down 20% so far this year, one might say coming down to earth? Monster Beverage was looking caffeinated on Friday, up 5.3% after strong sales of energy drinks pushed revenue above analyst expectations last quarter.
On Friday, the JSE All-share was down 1.58%, but the S&P 500 rose 1.59%, and the Nasdaq was 1.63% higher. Phew.
Our 10c worth
One thing, from Paul
Vestact is a relatively young business, established in 2002. Our first clients are now, like me, 23 years older than they were back then. I'm sad to say that a rising number of our clients have been dying.
The normal process when a natural person passes (I'm referring to South Africa-based, South African taxpayers) is that their assets with us are converted to an "estate late" account, and we await word from their executor on how to distribute the investment. Mostly, we transfer the shares to a new account for the beneficiaries specified in their will, but sometimes we sell the shares and pay the funds to the new estate late bank account.
For the record, Vestact cannot be your executor. For that matter, we do not provide tax advice, beyond the basics. We are an asset management company, and our sole function is to grow your capital through sound investment. We don't do wills, estates, trust administration or financial planning. We do not assist clients with completing their tax returns on SARS eFiling. We will not notify you that you have a capital gain to calculate for your next provisional tax return. You must do all that yourself or retain the services of a paid professional.
Dying in South Africa is expensive. Apart from executors' fees, which can be very high, up to 3.5% of your assets, there is also a big capital gains tax amount payable at the date of death because the transfer to your estate is deemed to be a disposal. On top of that travesty, estate duties are then payable on whatever is left. In other words, the state takes two bites out of your backside when you croak. Our tax system hits rich people very hard.
Estate duties are 20% on the first R30 million and 25% on the value of your estate above R30 million. There's an abatement of R3.5 million before they kick in.
So, when are you going to die? The grim news is that the average life expectancy in South Africa is 63.6 years for males and 69.2 years for females. The good news is that you may not die soon. Those average expectancies include people who die young. Once you reach a certain age, life expectancy can go up significantly. Still, you need to be prepared.
Byron's beats
We have quite a few clients selling portions of their portfolios to buy properties in South Africa. We are proud that we have contributed towards their financial security, so they are able to make these big decisions.
We often get asked if we think it is a good idea to sell US shares to buy a second SA property. Here's my standard answer. Buying property in SA is a lifestyle choice. You cannot enjoy a sunset over the ocean with your family from your share portfolio. If you can afford it, which many of our clients can, then by all means go for it. You could rent the place out on Airbnb to cover costs and make a bit of income from it at some point.
But do I think it is a good investment decision? No. I am very confident that your Vestact share portfolio will grow a lot more over the next 10 years than almost any property in South Africa, with far less admin. Buy the property if you can afford it but don't buy it just because you think it will be a good investment.
Michael's musings
Last week, the DRC implemented a four-month ban on all Cobalt exports from the country to boost the metal's price. The DRC produces over 70% of the mined metal each year.
The price of Cobalt reached a record high of $82 000 a ton in early 2022, around the time that the world was going crazy about EV and battery production. Since then, the price has been going in one direction, downwards, and was around $22 000 a ton last week. Since the export ban, prices have perked up a bit to $23 000.
It looks like the medium-term price drop is a function of increased supply and lower demand. China's CMOC Group more than doubled its output of the metal to about 114 000 tons last year. Cobalt is a byproduct of mining copper in some parts of the world, and in this case CMOC is ramping up copper production in the Congo, so Cobalt volumes rose too.
Cutting off exports for four months, with little warning, isn't great for investor sentiment and probably won't do much for the long-term Cobalt price either. There is also talk of export quotas once the ban is lifted. Trying to distort market dynamics to boost prices always has unintended consequences.
Bright's banter
YouTube and Netflix are each embracing parts of the other's business model. YouTube, which made $36 billion from ads in 2024, is testing a cheaper, ad-free "Premium Lite" tier in markets like the US and Australia. The goal? Convert more users into paying subscribers while keeping music videos ad-supported.
Netflix, once staunchly against ads, has embraced them since launching an ad-supported tier in 2022. Now, over 55% of new subscribers in ad-tier regions choose the cheaper plan. While ads aren't yet a major revenue driver for Netflix, co-CEO Gregory Peters expects the business to "transition from crawl to walk" in 2025.
Meanwhile, YouTube's dominance continues to grow, with total revenue surpassing $50 billion last year, about 70% from ads and 30% from subscriptions. More people now watch YouTube on TVs than on phones, making it a bigger rival to Netflix than traditional streamers like Disney and Amazon.
Luckily, our model portfolio has both YouTube-owner Alphabet and Netflix.
Linkfest, lap it up
Lisa Schiff was once a top-tier art consultant. She now faces up to 20 years in prison for stealing millions from those she advised - Misconduct in the art world.
Before Teams and Zoom, there was Skype. At its height in 2016, the platform had 300 million monthly users - Microsoft is shutting down Skype after buying it 14 years ago for $8.5 billion.
Signing off
Asian markets are mostly in the green this morning. Japan, Hong Kong, and mainland China are leading the gains, while South Korea and India traded lower. Everyone out there is just as shocked as we are about the events in the Oval Office on Friday evening.
In local company news, the JSE-listed property company that owns malls in Central and Eastern Europe, Nepi Rockcastle, delivered a good set of results, with full-year distributable earnings up 11.8% and its portfolio value nearing EUR8 billion.
US equity futures are comfortably in the green pre-market. The Rand is trading at around R18.63 to the US Dollar.
We are in the third month of the year. Keep up your momentum!