Morning all,

My plane only leaves tomorrow so I thought I'de squeeze in a quick post.

My evolution has so far looked something like this:
19 December 2007: The monkey debuts as a bear 
12 August 2008: The patient monkey catches the worm 
10 March 2009: The monkey becomes a bull

I'm sad to say that at today's market levels, I'm feeling a bit of a relapse coming on.
My next heading will therefore read something like:
04 June 2009 ... The monkey goes a little grizzly!

My thinking is simple.
[1] On average I'm not finding very tasty bananas out there any more.
[2] The level of earnings in the SA equity market is still too high and we will see more poo results reported.
[3] The run up (around the world) has been too much, too fast ... this feels like a bear market rally.

So, I have cut my equity exposure, banked my profit
... and hoping like hell I'm correct
... and that I will have another chance to purchase some truly glorious bargains!

Until next time,

Keep a swinging,

MM. 

Morning all you good-looking gibbons,

This is just a quick note to let you all know that I'll be out of the corporate jungle for a few weeks.
So instead of watching a computer screen in rainy Cape Town, I'm gonna be catching some sun up north
... that means no blogging.

Before I go though, here is a graphic that truly shows why inflation sucks ...



Need I say anymore?!

Until we meet again,

Happy investing and keep a swinging,

MM.

Good morning ta ya all,

Bertie raised an interesting question the other day (again).
He looked at our ability to accurately forecast the future.
Now this is a topic that I am really fascinated by.
I watch people forecast all day
... sometimes they get it correct
... sometimes they don't

My personal experience makes me believe that the outcomes are pretty random
... and that the proverbial "monkey throwing darts" has about as much chance of success.

"But monkey", I hear some of you exclaim
... "Don't you forecast?"
... "Don't you try and predict the future price of commodities & the Rand?"
... "How do you value Anglo Platinum if you don't try and forecast?"

Good questions (If I say so myself).
The answers to which highlight a very important point.

I try very hard not to allocate capital based on "forecasts".
I mostly just invest in companies that are trading in the market for less than I think they are worth.
... and the valuation?!
... doesn't that require forecasts?!

Not really.

Let us take Anglo Platinum (AMS) again.
To value the business I need to know how much revenue it can make.
To know how much revenue it can make I need to know how much it will get for its platinum.
I also need to know what R/$ it will achieve.
Surely, I need to forecast these macro variables?

Na.

What I really need to analyse is where AMS's operations fit on the cost curve.
I need to work out what margin AMS needs to make to generate sufficient returns to invest future capital.
Based on this "state of equilibrium" I can then determine what profit the business will make
... and based on this profit and cost profile, how much revenue AMS much achieve
... If I'm smart I can even determine what price the Rand platinum basket should be (if I analyse the whole industry).

You see I don't explicitly forecast.
I try and determine the equilibrium state.
The situation at which the world is in balance.
The position in which people aren't making too much money and folk aren't losing too much money.
I then make my valuation of the business based off this scenario.

I hope I have explained this well enough.
If not drop me a comment.

I'm sure that there are many readers out there who do believe in forecasting.
That is what makes a market
... a whole lot of people all trying to make money in different ways.
... what are your thoughts on the matter?

So sure I do like to try and predict events and scenarios
... but I hardly ever invest based on those predictions
... and most of those "visions" are actually based on a future state of equilibrium anyway

In relation to Bertie's post, it is interesting to note that George Soros doesn't believe in "equilibrium" either
... he believes more in a "self-reinforcing loop" that spirals the market one way or the other.

Until next time,

Keep a swinging,

MM. 

Morning,

There are a few stories on the go in our little financial blog-0-ville.
Instead of leaving long verbose comments, I thought I would give my view in a post.

A few people are chatting about Tito & bank charges.
You can catch a few of the discussions/posts at Just Money, Fools Paradise, SA Banks etc.
I have a pretty different view on the matter.
I see the SA banking environment as quite competitive.
Our banks are not making abnormal super returns on their capital.
Most of the banks are currently making returns on their equity of less than 20%.
If Tito regulates the bank's interest margin, the banks will allocate their capital away from SA.
The irony of the matter is that the interest margin in our banks is not high
... what is high is the "other income" i.e. bank charges, transaction fees, ATM fees etc.
I dunno?!
When you regulate pricing you get unintended consequences.
I'm happy with our banking system
... but then again, I am a fractional owner :)

Another common topic relates to gold & money.
The blogs that discuss this topic are Fools Paradise & Rediscovering Real Money
... and Cash Outvestments just likes the pretty yellow metal and recommends you trade it.

This is a complex topic, with no real answer.
My view is simple.
We are busy watching the devaluation of our monetary accounting system (i.e. currencies)
... not against each other but in their entirety.
The countries are doing this to wash out their current problems by devaluing their debts.
This is a serious problem for investors.
It is theft by stealth.
Gold is a protection against this theft.
Sure, all hard assets will work to some degree
... the problem is, is that those other hard assets are impacted by demand and supply
Copper for example may benefit from the US Dollar falling out of bed
... but it will suffer due to the demand for copper cables falling
Gold has no real use
... except as a currency and store of value.
That is why the monkey owns gold.
Not because he believes the financial system will come crashing down (which it could)
... but because he wants to protect his (and his clients) wealth from a slow insidious death.
I own AngloGold because I really rate Mark Cutifani and the company ;)

Marc Ashton raised an interesting point.
He wanted to know what we thought about financial journalists.
I gotta tell you Marc, in general ... I think they suck!
I am contacted on a weekly basis to give commentary.
Recently, the reporters are not even reading the results!
They seem to be clueless about the company
... and just want a sound bit to pop into their piece, which is really just the results commentary rehashed!

That having been said ... not all reporters are alike.
I was quite impressed to see one of our analysts receive an email from a Fin24 journalist.
The mail asked some decent questions and made me think the journalist really wanted to understand the result.

In general,
I am impressed by the SA magazine (and related web) journalists.
I am impressed by the SA TV journalists
... and horrified by the SA newspaper journalists

The magazine & TV reporters are experienced, know their stocks & seem to take a real interest.
This comes through in their work.
It does actually help me keep up to date with the plethora of news out there.

I think SA journalists (especially the more experienced ones) should write more opinion pieces.
I would like to know what someone who has covered a company for ten years thinks about the current management, its strategic direction etc.

That is why I like blogs.
It lets me interact with these experienced individuals.
*David: Can't you get more of those MiningMx folk to write a blog or two?

That is it for now.
I have many, many results to read.

Until next time,

Happy investing,

MM. 

Greetings and salutations you merry band of apes,

I just realized that I hadn't posted a monkey movie in yonks!

Generally, I post videos with chimps in them.
Today's post is a little different.
Sure the boss-dude is a bit of a monkey but it has no explicit reference to monkeys.

I do however like the message
It relates to an old post I wrote (in a very abstract way?!)
... and I found it funny!

Hope you enjoy.



Until next time,

Keep a swinging,

MM.

Evening all,

Before I retire for the evening I have to post something about the latest telephonic debacle.

Here is the background.
Telkom (TKG) had sold off a chunk of Vodacom to Vodafone.
It was then going to payout half the cash as a dividend and unbundle the rest of its Vodacom.
The deal was done.
The timing set.
In fact, the Vodacom stake was to be unbundled on this Monday coming.

... but hold the presses!

Late this afternoon Icasa pops up and says the whole process must stop and await a court ruling?!

Now I have seen a thing or two but this is looney!

The deal was given the go ahead.
Money had been spent.
People's time had been employed.
Investment decisions had been made and enacted.

How in monkey-hell do you try and stop the process the afternoon before the unbundling?!

Anyway, as was to be expected
... Vodacom is confused (and I'm sure just a little grumpy)

They (Vodacom) have therefore just put out a notice saying that the deal will go ahead.

I'm not really sure what is going on.

All I do know is that TKG is pretty good value at R114/share
... and that one day the unbundling will proceed.

Man!
What a circus.
Hopefully the clowns really make a show of it and TKG falls even more
... I could do with a few more TKG in my portfolio.

Until next time,

Keep a swinging,

MM.
 

Greetings,

Since this is a Naspers subsidiary I thought I should give all its diligent employees a little valuation insight - who knows, maybe one or two of them can get a few options.

Tencent reported some spectacular figures yesterday.
The share is currently trading at about 80 Hong Kong Dollars (HK$).
Naspers owns about 35% of this internet company.
This 35% stake now accounts for almost R150/share of Naspers' R190 share price!

Shew weee!

That deserves a closer look, ya?!

Here are the figures:

NPN's market cap is currently about R71bn
NPN has net debt of somewhere between R0bn and R3bn - to be conservative I will assume R3bn
NPN's enterprize value (i.e. equity + debt) is therefore about R74bn

NPN's Tencent stake is worth about R55bn
That leaves about R20bn for Pay TV, Media & the rest of NPN's technology & internet businesses.

Now Pay TV is a great business.
Basically a monopoly.
Annuity income.
Terrific pricing power.
Great margins and returns.
... it made a net profit of R3.4bn in 2008

If I just put this profit on a 12 xPE (i.e. as good as the average company in SA)
... I get a value for Pay TV of about R40bn.

You starting to see the issue?

If I take NPN's Tencent stake out, I am only paying R20bn for:
[1] Pay Tv (DSTV, MNET etc.)
[2] Media (Media24, Paarl Media, Abril etc.)
[3] Internet businesses ... which NPN have spent mucho moola on
[4] Technology businesses

... and I think Pay TV is worth at least R40bn just on its own!

So, basically

As long as you believe the Hong Kong market is valuing Tencent correctly
... you are getting half of Pay TV for free (and it is a great business)
... you are getting ALL of media for free
... you are getting ALL the other Internet businesses for free
... and you are getting ALL the technology businesses for free

Now you can see why I told Jade to go for those options!

All Mr Bekker needs to do to make an absolute fortune on his options is to crystalize some value from his prior investments, this will compel the market to take them seriously and value them accordingly.

Until next time,

Keep a swinging,

MM. 

Good morning all you silly simians,
 
Today I'm gonna chat a little about the South African gold stocks.
You see ... they are acting a little strange?!

Sure Goldfields (GFI) and Harmony (HAR) have put out pretty good quarterlies
... but with a Rand gold price close to R300,000/kg, what would you expect?

The problem is, is that the current Rand gold price is only R250,000/kg
... and believe me!
... that extra R50,000/kg makes the world of difference
... at the current gold price GFI would be lucky to earn 90c per quarter & HAR lucky to earn 70c per quarter

So why are the shares pushing higher?

Sure.
For some unknown reason the stocks tend to follow the Dollar gold price, which is strengthening
... but the Rand gold price is what really matters and that has been pretty weak.

What I have noticed though is that gold shares have this uncanny ability to forecast the actual gold price.
What I mean by that is that when gold shares run and the gold price is static
... it is usually only a matter of time before the gold price starts to tick higher.

Mmmmm.
I'm not sure but I do already think that the Rand gold price is offering pretty good value around the R7500/oz mark.
... and now the gold shares are pushing higher - trying to tell me something in their own odd little way.
... and I still do worry about debasement

So, I think I'm gonna buy me some gold
... well actually I've already bought myself some gold via the gold ETF (GLD)
... at the current prices I actually prefer the commodity to the stocks

Now I'm just gonna have to wait and see if the gold shares predicted correctly.

Until then,

Keep a swinging,

MM.