Presidential markets (#419)

Simon Shares

Day 188 of lockdown.

August CPI 3.1%. Everybody now suddenly knows about the expanded unemployment rate? Capitec* (JSE code: CPI) results were as always solid. Hit hard by the pandemic, but resilient. Valuations are rich, as always. Alviva (JSE code: AVV). Remember old Pinnacle, once a darling and then hit by claims of dodge tenders. They bought Datacentrix changed their name to Alviva and issued decent results. Everybody asking me about Ascendis Health (JSE code: ASC). To me it is binary, either they sell Remedica for a good price and they can bumble along, or they go bust. Debt is huge and risks are massive, sure some potential reward but why rush it? Remgro (JSE code: REM) results, +40% discount to net asset value (NAV). Either you view this as a cheap entry into some listed businesses inside Remgro. Or your view is that holding structures are value destroyers. PSG also at a massive discount to NAV. Typically discount used to be around 15%, but now we're seeing 40% discounts. Now the trade could be a closing of that discount, or just a cheap entry. Headline from CNBC "Disney to lay off 28,000 employees as coronavirus slams its theme park business". The pandemic is not over and some companies are still struggling to manage it.

* I hold ungeared positions.

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Less than five weeks until the US votes and then who knows how long to count the votes and get Trump out of the White House. The first debate on Tuesday shows what a mess the next few weeks will be.

After the debate, US futures markets were down some 0.75%, was it the debate or just markets? Maybe a bit of both.

Here's the thing. Some white man will win and be installed in January 2021. Market pundits will tell you it matters which. Remember the fear about a Clinton win and what it would do for markets back in 2016? Sure it became moot as Clinton lost, but the idea that one or the other will be better or worse for markets has scant evidence

Mostly it is trolling by one side or the other. The idea that one is anti markets is nonsense, both are ardent capitalists and sure Biden will keep the Affordable Healthcare Act, as an example, but after almost a decade in place, it has not broken markets. Biden may also want some minimum wages etc. Radical ideas for hardened capitalists, but there are minimum wages in many states - and non are bust as a result.

Raising taxes? Not on corporates, that boat has sailed and can't be recalled. On individuals, they can go up and while the rich will moan, what the NYT showed us on the weekend is that the rich don't pay tax anyway.

So how does one position a portfolio head of the election?

Carry on carrying on. Ignore the noise. Buy quality when you like the price.

Elections are noise and best ignored and sure they may create volatility - but volatility creates opportunity.

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