Things fall apart (Part 3) Markets

bhunt2 2In the third in this series by columnist Ben Hunt, (See parts 1 and 2 below), he continues in his inimitable style pulling lesser known literary works, comics and movie quotes together to explain his view of the markets. In this, the final of three parts, he begins by noting that many investors are anticipating the arrival of a US recession and an emerging market depression caused by raising US interest rates and a shrinking balance sheet,the devaluation of the yuan in response to trade war threats from the US,sparking a global credit freeze, and further stress in Euroland, sparked by Italy. But, he writes, the shock may well come from a fourth possible threat, rising inflation.For more, click here.

The Pulse of Fintech 2018: A biannual global analysis from KPMG

KPMGKPMG, the authors of the report, noted that fintech market activity worldwide gained momentum during the first half of the year as the geographic diversity and reach of fintech investment continued to expand. Brazil, France, Switzerland,South Korea and Japan saw significant fintech deals, extending fintech investment beyond traditional leaders US, UK, China and India. KPMG estimate that in H1'18 global investment in fintech companies was $57.9 billion across 875 deals. To read more,click here.

Private equity survey shows increase in venture capital activity

VentureCapitalThe Southern African Venture Capital and Private Equity Association (SAVCA) 2018 private equity survey covering the 2017 calendar year showed that despite a tough economic and political climate in 2017, investment activity in the VC sector increased. For the first time the overall value of deals recorded in a year amounted to more than R1 billion. In SAVCA's view, this upward trend will continue. To read more, click here.

Could the 'Buffett indicator' help you find value in offshore markets?

WarrenBuffetBreaks in upward momentum of the MSCI North America in January 2018 and again at the end of October 2018 could be signs of further volatility to come. Should new money still be allocated to the US? And could the 'Buffet indicator' help with the allocation of assets? Trevor Lee of Rosebank Wealth Group writes that investors should be constantly mindful of valuation and market risk and should diversify portfolios across countries, risk strategies, investment managers and asset types. To read more click here.

Things Fall Apart (Part 2)

bhunt2 2In Things Fall Apart (Part 1), Ben Hunt noted that the US no longer has either winning centrist politicians or centrist policies. In this article he suggests that just as US voters are pulling apart, so are so are portfolios are falling apart. His chief gripe is with central bankers who intervened post 2008 to keep capital markets from collapsing, and as a result, 'turned capital markets into political utilities'. He is alarmed that the three wealth bubbles over the last 20 years have enabled US citizens to grow richer at a faster rate than the underlying economy. He is also alarmed that a minority of the population are getting richer at the expense of the greater population. To read more, click here.

Pay less tax and be patriotic? Yes it can be done

TaxUSThe attraction of the upfront income tax relief, via Section 12J, is that it effectively reduces the cost of the investment, thereby boosting overall returns. Trevor Lee of Rosebank Wealth Group explains more about the regulations and rationale of this option. This article was first published by Moneyweb. To read more, click here.

The real cost of low-fee funds

ActivePassiveIn this article John Mauldin urges investors to calculate the 'true cost of a buy-and-hold strategy, and the hidden cost of using low-fee funds'. He writes that most studies used by investment advisers to justify this strategy use long time frames (40 or 50 years), which, he argues, is a time frame that most investors do not have. He also reminds readers that bear cycles can last for 20 years before recovering. While returns may be good in bull market, he writes, in a bear market, you are simply diversifying your losses. To read more, click here.

Use tax efficiency to enhance your long-term returns

TrevorLeeSouth Africans can enhance their long-term investment returns by taking advantage of suitable exemptions permitted by Sars and by reducing their income tax via rebates. Trevor Lee of Rosebank Wealth Group explains how, in this article first published by Moneyweb. To read more, click here.

SA in technical recession

SAFlagAccording to data released by Statistics SA, South Africa is in an economic recession with a 0.7% contraction in the second quarter of 2018. This is despite expectations that there would be reported growth levels. The rand weakened sharply shortly after Statistics SA released the news. In other news, it was reported by National Treasury that as of the end of July 2018, the difference between government revenue and expenditure reached R95.9 billion, the most since 2004. To read more, click here.

The 2018 financial markets review

SAFlagThe 2018 Financial Markets Review, released by National Treasury in September 2018, is compiled with available information from departmental sources, the South African Reserve Bank (SARB) and Financial Sector Conduct Authority (FSCA). It is important as it is the first review that has been released since the first stage roll-out of the twin peaks regulatory system. The report is divided into seven chapters which address governance, market conduct, market structure, trading venues and technology, regulatory framework, and the finalisation of the 2015 FX Review. To read more, click here.

The growing economic sand pile

John MauldinOne of our favourite writers, John Mauldin, says that investment portfolios have two functions; they have to simultaneously participate in growth and protect investors from possible loss. Mauldin connects this thought the art of building piles of sand and investigating at what point the pile will topple and collapse. He says that like a pile of sand reaching its tipping point, the more comfortable we get with a given condition or trend, the longer it will persist, and then when the trend fails, the more dramatic the correction. In the financial context, he writes, the collapse of the pile of sand could take years. To read more, click here.

Global health and aging

OldAgeThis document published by the World Health Organisation states that the world is facing an unprecedented situation; there are increasing numbers of older people and less children. Key questions arise. Will population aging be accompanied by a longer period of good health, a sustained sense of well-being, and extended periods of social engagement and productivity, or will it be associated with more illness, disability, and dependency? How will population aging play out differently for low-income countries that will age faster than their counterparts have, but before they become industrialised and wealthy? To read more click here.

Why land expropriation without compensation is a bad idea

TractorOn 27 February 2018, the National Assembly made a landmark decision to review Section 25 of the Constitution in order to cater for the principle of land expropriation without compensation. This article, published by the Centre for Development and Enterprise and written by Wandile Sihlobo and Tinashe Kapuya argues that land reform (through both the state and the market) has made more progress than experts admit,that expropriation without compensation is a catastrophically bad idea, and that trust between government and private sector is essential for the success and sustainability of effective land reform. To read more, click here.

South Africans differ on land reform. But there needs to be a meeting of minds

TractorThis article, first published by 'The Conversation', and written by Roger Southall, Professor of Sociology at the University of the Witwatersrand says that South Africans can't afford to let the land debate be reduced to a shouting match. He writes that President Cyril Ramaphosa's announcement on July 31st 2018 that the government was going to push ahead with implementing a decision taken by the ANC at its national conference last year to expropriate land without compensation has set the cat among the pigeons. To read more, click here.

A 'dating service' that is helping young people in South Africa find work

unemploymentGlobally, South Africa has one of the highest unemployment rates at 26%, a figure that has steadily increased over much of the last decade. Among young people, things are worse. One in three aged 15 to 24 are either unemployed, studying or in any kind of training, according to StatsSA. Reasons include a public education system with high drop-out rates, slow economic growth and BEE schemes that have benefitted only a few, as well as the legacy of apartheid. To read more, click here.

Things Fall Apart. (First in a series of three articles)

Ben HuntIn this article, Ben Hunt, one of our favourite writers, comments on the widening gulf between Democrat and Republican voters in the United States. As usual, he begins with a series of literary cameos, not all of which are familiar to South African audiences. But it is worth persevering to read what he has to say about what could happen when 'things fall apart', the end of mediation and cooperation between political parties. To read more, click here.

How should I use a lump sum for monthly income?

Peter smallerA Moneyweb reader posed a question to RWG Director Peter Nurcombe-Thorne. '...I am a single, 55-year old woman. I have R500 000 and I need a monthly income from this amount. Should I invest or buy a small flat to rent out?' Read his answer by clicking here.

Global Financial Development Report 2017/2018: Bankers without Borders

International MapThis report from the World Economic Forum highlights the benefits and costs of international banking. It shows that countries that are open to international banking can benefit from global flows of funds, knowledge, and opportunity but that the regulatory challenges are complex and, at times, daunting.

It reports that post-global financial crisis the globalisation trend has been partially reversed, as multinational banks from developed countries scaled back their international operations, coinciding with a general backlash against globalisation. At the same time, developing country banks continued their international expansion, accounting for the bulk of new entry into foreign markets. Greater South–South activity has also coincided with regionalisation, both in the roster of foreign banks in many host countries and in cross-border flows. To read more, click here.

How to dodge the debt train

John MauldinIn this article, John Mauldin gives investors some tips on 'how to dodge the debt train' from the perspective of investors in the United States. But his advice holds true in any volatile and uncertain investing environment. He writes that investors should be active, mindful investor, take tax breaks where they are offered and mix both investment strategies and investment managers. All pretty much what we recommend at Rosebank Wealth Group.To read more, click here.

The world's 500 largest asset managers

AssetManThis document, with joint research by Pensions & Investments and Willis Towers Watson, published in October 2017 offers a wonderful decade-long analysis of the changing face of asset management around the world. With data to the end of 2016, the report notes that independent asset managers comprised 10 of the top 20 asset managers, followed by seven banks and three insurer-owned managers. It also noted that 78.4% of all assets are actively managed (down by 2.3% since the previous report) while passive AUM increased 5.9% during the same period. To read more, click here.

Some good news from the Stats SA Living Conditions Survey

StatsSA logoThis Stats SA survey somehow escaped coverage by main news channels. It reports on the subjective poverty levels based on data collected by Stats SA in 2009 and 2015. Over the years,Stats SA has produced a number of reports based on various definitions and measures of poverty. These include objective measures, relative measures, multi-dimensional measures as well as subjective poverty measures. Subjective poverty, the main focus of this report is defined as the self-assessed economic status of people relative to others. The results indicate that nationally, the percentage of people who lived in a household perceived as poor has declined from 39,2% in 2009 to 35,0% in 2015. For more, click here.

The Debt Train Will Crash

JohnMauldin2This article by John Mauldin is a summary of the series on debt, pensions and retirement. He writes that in his view, excessive debt is dragging the world economy toward an epic crash. The tracks ahead are clear for now but will not remain so. This article underlines just how big the problem is. To read more, click here

Rising corporate debt; peril or promise?

McKinseyThis recent publication from the McKinsey Global Institute (MGI) notes that since the 2008 financial crisis, global debt has continued to rise. Much of this increase is due to a surge in government borrowing, but corporate debt has risen over this period by nearly as much. Corporate bond issuance has increased 2.5 times over the past decade, creating a broader and deeper market in many countries. This document examines the fact that total debt (including household, nonfinancial corporate, and government debt) has grown by three-quarters since the financial crisis, from $97 trillion in 2007 to $169 trillion in the first half of 2017 in constant exchange rate terms and the consequences of this.To read more, click  here.

Global Competitiveness Report 2017-2018

WorldEconomicForumThe World Economic Forum Global Competitiveness Report 2017-2018 ranked South Africa (SA) 44th out of 137 countries in terms of its financial market development, a drastic fall since 2016, when SA was ranked 12th out of 140 countries. This rating is made up of eight metrics each of which has separate rankings. In 2016 SA was ranked first for 'financing through local equity markets' and second for 'regulation of securities exchanges'. In the latest rankings SA's score for these two metrics was 25th and 46th respectively. To read more click here

Europe has train wrecks too

John MauldinOne of our favourite writers, US-base John Mauldin uses the results of a study from the World Economic Forum study on retirement shortfalls in eight countries as the starting point for his remarks in this article. The WEF report states that if the  retirees were to be funded at 70% of their last income, there would be a $400 trillion retirement savings shortfall by 2050. Unless the countries concern find the cash, he writes, they will break their promises to workers. To read more, click here.

Dealing with portfolio headwinds. When do you panic?

Peter smallerScary investment returns over the last ten years? Peter Nurcombe-Thorne advises retirement savers when they should panic. Tip: the answer is that tweaking your portfolio is OK, but panicking is not. But this assumes that your retirement portfolio has been designed to withstand the storms. To read more, click here .

Which should you choose; to top up your RA or invest in a tax-free account?

Peter smallerFrom time to time Rosebank Wealth Group is asked to answer Moneyweb readers' questions. Recently Peter Nurcombe-Thorne answered this question:

I am currently 54 years old and contributing to a pension fund and RA. I am also contributing towards a tax-free fund of R33 000 per year. I am however not using the full 27.5% contribution towards the pension/RA funds on my total remuneration as per Sars. My question: Would it be better to first use the tax benefit as allowed by Sars before investing into a tax-free fund? Financially I am not able to contribute the full 27.5% plus the R33 000.

To read his answer click here.

A wonderful analysis of long term returns

CredSuisseThe Credit Suisse Global Investment Returns Yearbook 2018 offers investors a wonderful bird's eye view of the performances of different asset types in 23 countries from 1900 to 2017. It shows that equities have been the best long-run investment and that globally, the returns and risks from housing have come second, followed by bonds. Over the time period, gold has given poor returns, high volatility, and been a poor inflation hedge and collectibles such as art, wine and musical instruments have beaten cash and government bonds. To read more, click here.

Are my financial advisor's fees justified?

Peter smallerRWG's Peter Nurcombe-Thorne was asked to answer a question posed to Moneyweb on whether or not a 1% ongoing fee (over and above other administration fees) was justified. To read his answer, click here.

Five tips for the ideal long-term retirement portfolio

Wild SeaIn a recent article published by Moneyweb, RWG Director Peter Nurcombe-Thorne wrote that it might be useful to think of saving for your retirement like planning a forty-year journey on a yacht, across wild and unpredictable oceans. To read more, click here.

South African expanded unemployment rate up to record high of 36.7%

StatsSA logoIn mid-May Statistics South Africa released the Quarterly Labour Force Survey. It showed that the SA unemployment rate remained unchanged at 26.7% in the first quarter of 2018, helped by an increase in formal sector employment. However, it reported that the number of discouraged workers had risen to an all-time record high. The number of unemployed people and discouraged work seekers (the expanded unemployment rate) is now 36.7%. To read more, click here.

Weird and wonderful offshore shares

Peter smallerLet's assume you have made the decision to invest offshore, because you know that the JSE's market cap is less than 1% of listed companies in the world and you should diversify your portfolio. You also know that now is a good time to invest offshore because we are reaping the 'Ramaphoria' dividend and the rand is relatively strong. So what next? The main requirements for your new investments would be that the underlying holdings add diversity to your existing portfolio while offering good value. Click here to read more.

Notes from the field: Good job

Ben HuntIn this article Ben Hunt writes that the words 'Good job', whether said from a parent to a child, or a teacher to a pupil or a coach to an athlete are overused and sometimes dishonest. He says that this extends to investment advisors who unthinkingly support different products. The alternative to this dishonesty is convexity, which he says is a philosophy about identifying what you are particularly good at, and then executing on it. For more click here.

Outrageous predictions for 2018

Peter smallerAt Rosebank Wealth Group we keep a sceptical eye on a wide range of predictions, forecasts and scenarios published by analysts across the world. One of the more interesting is an annual list of ten outrageous predictions published by Saxo Bank, a Danish bank. Saxo's purpose in creating the list is to ensure that they remain alert to unlikely possibilities, forcing them to broaden their thinking. We like this approach. To read more, click here.

Interview with Davie Krige, founder of Cederberg Capital

DawieKrige 3Dawie Krige, founder of London based Cederberg Capital was recently interviewed by well-known South African Alec Hogg, founder of Moneyweb and Biznews.com. In 2017 Krige's fund enjoyed a performance of 75% putting it in the league of the top 1% of all funds in the world. The fund focusses exclusively on investing in companies based in Greater China. RWG clients who are invested in the GAAF funds have exposure to this fund. The interview below is a shortened version of the interview and is reproduced courtesy of Biznews.com. To read a shortened version, please click here, to read the whole interview please click here. Photo courtesy of Biznews.

Five things to watch at Davos 2018

WorldEconomicForumThe World Economic Forum's (WEF) annual meeting is scheduled to take place from January 23-26, 2018 with the theme 'creating a shared future in a fractured world'. The 48th meeting is set to host 3 000 participants including presidents, prime ministers and business leaders. Records of attendees released for the first time report that 58 South Africans have been confirmed as attending the meeting (down from 61 in 2017). This article, published by Time magazine, highlights five things to watch out for. To read more, click here.

Reward work, not wealth

OxfamOxfam always releases its report on wealth disparity to coincide with the gathering at Davos. This year's report says that 2017 saw the biggest increase in billionaires in history, one more every two days. 82% of all wealth created in the last year went to the top 1%, and nothing (sic) went to the bottom 50%. It says that in South Africa, the top 10% of society receives half of all wage income, while the bottom 50% of the workforce receives just 12% of all wages. Oxfam suggests that global economy will falter if there are too many billionaires and that rising inequality will cause the rise to populism, racism and fear mongering. The Oxfam report confirms that a majority of people want to live in far more equal societies. To read more, click here.

How small companies can compete on the world stage

SmallBusinessBill Ready, COO of PayPal writes that small businesses play a critical role in the global economy, contributing to economic opportunity, diversity and the overall health of our communities. If current trends continue, however, we may soon wake up in a world where many of these businesses have closed and only a few of the very largest players remain open. This article includes some interesting statistics on the percentage of small business relative to the total businesses in India, China, the United States and the UK. To read more, click here.

These nine charts will tell you everything you need to know about global migration

MigrantJohn McKenna writes that the millions of migrants who flooded through New York's Ellis Island in the early 20th century helped turn the city and America into an economic powerhouse. Migration across the British Empire was central to its success at the heart of the Industrial Revolution. He says that many of the world's most high-profile entrepreneurs have hailed from migrant backgrounds: Steve Jobs' father was a migrant from Syria and mentions South African Tesla founder Elon Musk, who moved to North America to study in Canada and the United States. To read more, click here.

Eight leadership lessons from history

NapoleonHistorian Margaret MacMillan writes that the world's political leaders including Napoleon, Empress Wu, Franklin D. Roosevelt, Oliver Cromwell, Akbar and Stalin provide us with examples of strong leaders. They left their mark, for better or for worse. But history cannot provide a formula for how to become an effective leader. But it can suggest patterns and parallels, raising questions, and giving warnings about why things go wrong. To read more, click here.

Why 2018 must be the year for women to thrive

WomenBusinessChristine Lagarde, managing director of the IMF and Erna Solberg, Prime Minister of Norway write that the economic facts speak for themselves: raising women's labour force participation to that of men can boost GDP, for example, by as much as 9% in Japan and 27% in India. IMF research has uncovered myriad other macroeconomic benefits. It says that reducing gender gaps in employment and education can help economies diversify their exports. Appointing more women onto banking supervision boards can challenge cozy group-think thereby supporting greater bank stability and financial sector resilience. Click here for more.

Good-bye,GDP. Hello, six-part balance sheet?

GDPEconomist Diane Coyle says that the idea that Gross Domestic Product (GDP) is inadequate as a measure of economic well-being dates back to the 1960s. At the time, environmentalists and feminist scholars pointed out some obvious shortcomings: the failure to account for environmental externalities and the failure to count valuable non-market services such as work in the home. But it is only in the past decade that the need to go 'beyond GDP' in measuring economic progress has become increasingly mainstream. To read more, click here.

These charts show how migration is changing cities

MigrantMigrants tend to head to global cities. Dubai and Brussels have the highest number of foreign-born population at 83% and 62% respectively. According to the World Economic Forum, South Africa is the 17th most popular recipient of refugees by number, but new arrivals measured as a percentage of the population are less than 5%. Nearly one in five (19%) of the world's total migrants went to live in the United States. Germany and Russia together took in one in 10 (9.7%). To read more, click here.

The Distribution of Pain

JohnMauldin1 FullIn this article columnist John Mauldin writes about painful social and economic divisions in the United States and the possible consequences of the widening gulf. He describes how the "Protected" classes make public policy and the "Unprotected" classes live with those policies. He writes that people don't like pain and will change their behavior to avoid or relieve it. 'Like the drowning who desperately seek something to hold onto, they will vote for politicians who say they can relieve that pain, regardless of whether they actually can,' he writes. For more click here.

Graduating? First job? Some tips on how to allocate your first salary

Peter smallerPeter Nurcombe-Thorne writes that many young graduates are 'ambushed' by determined commission-driven product pushers at this time of the year. And this is made worse because so few employees have help from their employers; only 40% have access to a retirement funds as a condition of service and only 25% have employer managed medical schemes. This leaves most workers to make their own decisions. If you are about to earn your first salary, how should you go about dividing your income between life insurance, disability and income protection insurance, investments and retirement saving? To read more, click here.

The world has turned upside down

USflagIn this article John Mauldin notes that the volatility of the stock market, as measured by the VIX is at an all-time low. Low volatility indicates faith or complacency in markets, which Mauldin argues is currently misplaced. He suggests that the number and scale of recent catastrophic natural and man-made disasters, geopolitical instability and political failure in Washington D.C., the investing temperature should be higher. The low volatility is thus sending out a false signal that nothing can go wrong. We know that this is unsustainable. To read more, click here.

Hoisington Quarterly Review and Outlook, Third Quarter 2017

USflagAccording to Lacy Hunt and Van Hoisington, analysts from Hoisington Investment Management (a Texas-based investment adviser) consumers in the United States account for two-thirds of US GDP. 'Consumer spending is funded either by income growth, more debt, or some other reduction in saving. Recent trends in each of these categories, do not bode well for this critical sector of the U.S. economy,' they write. They expect that the expected December federal rate-hike will put upward pressure on the short-term interest rates causing inflation to fall, pushing long Treasury bond yields lower. This view flies in the face of most other current views on inflation. To read more, click here.

Hurricane Maria Is Killing Puerto Rico's GoldenGoose, but It Was Already Dying

PatrickCoxThis interesting article from Tech Digest, written by Patrick Cox explains that the biggest bill payer in Puerto Rico is 'big pharma'. It accounts for more than half the territory's manufacturing, 25% of its GDP, employs about 100,000 people and accounts for 75% of exports. Post-hurricane, drug companies want improved infrastructure and reliable electricity supply. To read more, click here.

Uncle Sam's unfunded promises

Pensions2In this article columnist and investment strategist John Mauldin takes a hard look at the unfunded liabilities and debt of the US government. 'Even though the federal unfunded pension liabilities dwarf those of state and local pensions, I want to make it clear that I believe the state and local problems will be far more intractable,' he writes. He explains that all workers pay taxes that supposedly fund the benefits Americans may someday receive. But Federal debt as a percentage of GDP has almost doubled since the turn of the century. To read more, click here.