Money Marketing – When will the rand weaken – and against what?

In my practice I am regularly asked by some clients to give my views on the direction of the Rand relative to their investments or those portions of their investments that are exposed to other geographic regions and currencies of the world.  This, of course, calls for extreme caution on my part as I am led in my views by the opinions of the experts on these matters and even they can’t stick their necks out too far in terms of prediction.  What they, however, do is to study the trends and various global influences on currencies in order to arrive at their respective, qualified opinions.  
Paul Stewart, managing director of Plexus Asset Management has the following to say: “Ultimately the direction in which a currency trends is a function of aggregate demand and aggregate supply of the currency versus other currencies.  The demand for currencies is largely affected by exports, imports, service payments, portfolio investments, domestic fixed investment, foreign fixed investment and speculation on future expectations.  Based on these factors, how is the SA rand likely to perform in the foreseeable future?  As a general observation, the SA rand is overwhelmingly viewed as overvalued at present and that a sharp devaluation is imminent,” says Stewart.  “In fact, many respected commentators have publicly stated their view that investors should currently accumulate foreign currency exposure, in anticipation of a great unwinding of the rand’s value.”

…….“currency diversification needs to be seriously reconsidered in this new world.  Non-South African exposure for diversification reasons needs to be much more carefully considered. A higher emerging market currency exposure, especially to the best quality emerging markets, should be a core part of one’s investment policy.”
In order to bring the above into context  Continue reading Money Marketing – When will the rand weaken – and against what?

Retirement Fund Deductions: One door closes, another opens

According to the 2011 Budget Review, 1 March 2012 will see the introduction of a new dispensation for permissible deductions towards retirement funds. There is a clear twofold message behind these changes, particularly when read together with the taxation of lump sum benefits:

– higher income earners will have to make additional provision for retirement outside of tax incentivised retirement funds; and

– retirement fund benefits are intended to provide annuities at retirement and not tax free lump sum benefits on withdrawal and retirement.

Read On …

Money Marketing Newsletter – Inflation – how to interpret it……

Inflation – how to interpret it – how to measure it – how to combat it – how to relate to it in our own financial plans?  These are questions we often ask.  This week’s Money Marketing offers an easy-to-relate-to view on Inflation/CPI worth reading.  In my own office I have an interesting visual aid that has been up on my wall for many years illustrating the effect of inflation. When you visit my office, make sure you take a look at it. The basic story: In 1972, for example, the following mode of transport could be purchased (new) for only one thousand rand (R1 000): a Motor Car. Today it is not uncommon to pay R1 000 or more for a pair of shoes or for your child’s roller skates.  We know the story!  But what are we doing about it?  Continue reading Money Marketing Newsletter – Inflation – how to interpret it……

Market Commentary – JAPAN – by RMB Asset Management International

“A 9.0 magnitude earthquake occurred off the north-eastern coast of Japan on 11 March (Friday). This is the largest earthquake ever recorded in Japan and Prime Minister Naoto Kan has said the nation is facing its sternest test since World War II as it tackles the aftermath of an earthquake, tsunami and a growing nuclear crisis. Thus far 1,500 bodies have been found, but estimates of a final death toll are up to ten times this figure.”   Read on…..

Estate Planning Essentials

The dangers of an unsigned will and intestate succession.

A will is essentially a contract one enters into with the person one wishes to take charge of dealing with all one’s assets (and liabilities) after one dies.  A non-existent, unsigned or incorrectly signed will can cause practical problems and place surviving family members and dependants under immense stress when one is not around to assist them in making financial decisions. Read on….

Vooruitsigte vir Suid-Afrika se beleidskoers

Volgens Arthur Kamp, Beleggingsekonoom, Sanlam Beleggingsbestuur het  “…….die opwelling in die binnelandse ekwiteitsmark vanaf die resessie-geïnduseerde laagtepunt in 2009, gehelp on ‘n terugspring in huishoudelike netto welvaart te stut, wat die herstel van huishoudelike verbruik verder ondersteun het.  In der waarheid het verbruikersbesteding die konsensus-verwagtinge op verrassende wyse deur die loop van 2010 oortref, met ‘n gemiddelde groei van tussen vyf en ses persent (teen ‘n jaarlikse koers) per kwartaal van 4Q09 tot 3Q10.
Soos die sakesiklus se opswaai ontvou, kan daar verwag word dat die opbrengskoers op kapitaal sal verbeter, wat die herstel in vastebeleggingbesteding en werkskepping in die privaat sektor sal aanmoedig.  Derhalwe word daar verwag dat die opswaai in binnelandse finale aanvraag deur 2011 en tot in 2012 momentum sal behou.” Lees verder….

Prospects for South Africa’s policy rate

According to Arthur Kamp, Investment Economist, Sanlam Investment Management  “……the surge in the domestic equity market from its recession induced low in 2009 has helped underpin a bounce in household net wealth, thus further supporting the recovery in household consumption.  Indeed, real consumer spending surprised consensus expectations to the upside through 2010, advancing, on average, at an annualized rate of between five and six per cent per quarter from 4Q09 to 3Q10.
As the business cycle upswing unfolds the rate of return on capital can be expected to improve, which should encourage a recovery in private sector fixed investment spending and job creation. Hence, the upswing in domestic final demand is set to maintain momentum through 2011 and into 2012.”  Read on….

Money Marketing Newsletter – Lessons for our budgets

Next Wednesday sees the presentation of the annual Budget by Finance Minister Pravin Gordhan. This is a very big occasion for SA inc and pages are devoted to it, opinions are expressed and written. The Budget is – in essence – our roadmap as a country for the year. So while next week will be devoted to the National Budget we felt it appropriate to take a few lessons into our own budgets.

Lessons for our budgets from the nation’s Budget

The Budget is one of the biggest occasions in the country – extensively followed. In coverage and opinion it may rank second only to announcements of various sporting teams and natural disasters. Each year South Africans are invited to submit their Budget tips on the National Treasury website. But there are many lessons we can take from the country’s Budget and put into practice in our own budgets. Budgets are massive occasions for the country and for businesses – they are that important and we need to make our own budgets equally important.   Continue reading Money Marketing Newsletter – Lessons for our budgets

The Weekly Focus – Bull Market forges on


Executive Summary

Last week was an amazing week for our stock market and offshore markets. In the midst of concerns about a correction and Egypt, the market promptly jumped 4.3% in rands (3.4% in dollars, not shabby) to another post-crash high as the US market gained 2.7% in dollars and the MSCI World Index gained 2.3%.

  • For good measure, Anglo American stole the show, jumping 12% in one week, followed by Billiton and Sasol’s 9%. So yes, the JSE Resources index was up 8.7% to its best level since mid-2008, while the Financial & Industrial Index rose just 1.3%, despite a nasty 7% fall in the Construction Index.
  • The ALSI 40 Index, with 48% in Resource shares (including Sasol), is benefiting from this run (Anglo & Billiton comprise 29%), while 44% of the All Share Index is in Resources, also quite high. Most SA fund managers benchmark themselves against the SWIX Index (Shareholder Weighted Index), which excludes foreign holders of our shares and has about 32% in Resources.
  • Meanwhile, the SA Listed Property Index is now down almost 8% from its recent January 10th high and is also trading 5.5% below where it was 4 years ago (peak in 2007). On a forward dividend yield of 8.8% 12 months out, it is starting to look quite attractive relative to bond yields (now at a similar yield after a big jump) and money market yields (now 5.6% and maybe 7% in 18 months time).
  • However, the unknown is whether the rand continues to weaken. If it does, it may cause bond yields to rise over 9%, which could negatively affect listed property further. If investors wanted to buy listed property at this stage, perhaps using a phased approach makes more sense, i.e. buy some now and hold off pending the rand’s movements.

To see the full review; please Read on…..

Money Marketing Newsletter – Where is the Rand Headed?

By Dr Simon Pearse, Marriott Asset Management CEO

The hottest question in the investment industry right now is “where is the rand going to go?” The answer, of course, is not simple.

There are numerous factors influencing the currency at present, not least the attempts by many countries to weaken their currencies in order to export their way out of recession. With much of the developed world having opted for this path, their currencies, and notably the dollar, have seen value erosion. Continue reading Money Marketing Newsletter – Where is the Rand Headed?

Executive Summary of Weekly Focus

(by Group Advisory Services, Stanlib)

Market Comment

  • September was a great month for markets, with the JSE gaining 8.7% (15.2% in dollars), while the MSCI World Index gained 9.4% and the MSCI Emerging Markets Index gained 11.1%, both in dollars. With the rand gaining 5.9% in September against the dollar, these two returns were 3.4% and 5.1% respectively in rand terms.
  • The rand also gained 3.6% against the pound, but lost 1.3% against the euro, one of our big trading partners.
  • The ALSI returned 13.3% over the quarter to end September (24.2% in dollars).
  • Although bonds have done very well (up 14.1% YTD), both the JSE Industrial Index (up 18.2%) and the Financial Index (up 16.7%) have beaten bonds, while the Resources Index (-3.6%) has struggled.   Cash has done 5.3% YTD.
  • Foreign investors have taken some profits lately, with a total of R8.9bn net flowing out of our bonds and equities over just the past 10 days, with very little impact on the rand so far.

Where to now?

  • After such an impressive jump, markets could pull back a bit in October.   Note that, apart from cash and residential property, almost everything is in a bull market.  Copper jumped 9.5% in September to its highest price since before the Lehman Bros crash. Oil jumped 8.5%, palladium jumped 16%, silver 12%, gold 5% and platinum 8.5%.
  • The point is, as Fidelity’s legendary value fund manager, Anthony Bolton said last year, slow world growth, minimal inflation and low interest rates are a good environment for equities….also for commodities and not bad for bonds either.
  • BCA Research admits that economic uncertainty remains high, although in a nutshell they think we are slowly passing the soft patch; but more easing by the US is still needed.
  • They note that although US consumer spending is growing slowly, in absolute dollar terms it is now at an all-time record high, as are US company profits.
  • BCA’s asset allocation model has just up-weighted equities at the expense of bonds, especially Emerging Market equities.

Snippets of Info

  • The Financial Times reports that the US TARP programme, whereby they lent money to besieged companies like GM, Citigroup, AIG and Bank of America, is on track to cost just $50bn, way below the $700bn original estimate.  In fact, the US taxpayer may even make a profit.
  • The FT reports today that 3 Brazilian and 2 Chinese banks are among the world’s top 10 credit card issuers, more evidence that banks and consumers in the emerging markets are leaving their western rivals in the shade.

Economic Weekly

  • The SA leading economic indicator recorded an impressive rise of 1.1%m/m.
  • Stats SA released the CPI headline inflation last week, which fell to 3.5% mainly on the strength of the Rand.
  • SA PPI accelerated slightly to 7.8 percent y/y in August from 7.7 percent in July, driven mostly by mining and electricity.
  • SA credit growth increased in August mainly because of a large increase in mortgage advances.
  • Overall credit growth is clearly looking a little more encouraging.
  • SA trade account recorded a larger than expected deficit of R4.66bn in August 2010, due to a sharp decline in mineral and metal exports 
  • In the US last week, personal income rose more than expected in August 2010.
  • US consumer confidence fell sharply in September to 48.2, well below market expectations.

To see the full review, Read on…..

Efficient Group – Events to Watch 6 to 10 September 2010

Economic variables released during the course of the past week gave an indication of South African international trade, demand for credit and money supply in the economy. These variables are very important to look at as they give an indication of consumer demand (demand for credit) and foreign demand for South African produced goods. Read on ….

Estate Planning Essentials – The Farmer and his Will – Part 3

This edition of Estate Planning Essentials is the last in a 3 part series and looks at some of the practical issues that farmers face, concerning their estates.   Read on…

Executive Summary of Weekly Focus (by Group Advisory Services, Stanlib)

Market Comment

  • STANLIB’s economist, Kevin Lings, continues to believe (even after recent weak numbers) that there is only a 20-30% risk of a “double-dip” recession in the near term, meaning that there is a 70-80% probability of continued, albeit slower, global growth.  Many top analysts/economists agree with this view, saying that it is quite normal to have a slowdown after an initial burst of activity, as the re-building of inventories comes to an end.
  • Volatility remains high in markets as the news ebbs and flows from good to bad during this slowdown, causing emotions to run high.
  • Last week markets jumped smartly by 3-5%, just when many investors were preparing to jump ship.  Many did just that as US equity funds saw their 5th largest weekly redemption on record (2nd largest since June 2008).  Global money markets attracted $33.5bn, which is the biggest weekly inflow since the dark days of January 2009.
  • But the bottom-line for equities offshore and locally is the big picture, namely the world economy, because this directly affects company earnings, which feeds into share prices.
  • A few commentators have lowered their growth forecasts for the US because of the slowdown, but are still forecasting 2.9% growth for 2010 and a little slower for 2006.
  • One of the most convincing pieces of the puzzle arguing in favour of the continuation of a cyclical global bull market in equities is the US yield curve, where the ten year US government bond exceeds the short-term Fed Funds rate by around 3%.  This usually foretells of positive economic growth.
  • On the currency front, the euro bounce against the dollar is so far intact, in line with renewed risk-taking by investors (and a much lower Vix  or fear index) and although the rand has regained a bit against the pound, the trend of rand strength to the pound remains broken.

Snippets of Info

  • Spain stands to benefit much more than Holland from its mighty win because its 40.5 million people have been suffering badly from one of the nastier economic slumps and very high unemployment of over 20%.  So let’s hope the “animal spirits” there help raise the Spanish people out of their economic suffering and boost their economy.
  • South Africa has made us all extremely proud through staging the world cup and the Sunday Times’ quote from former US politician (born in Germany), Henry Kissinger (he of the deep, deep gravelly voice), says it best: “It has been the most exciting (world cup) and I have never seen one better organized and with greater hospitality.”

Economic Weekly

  • The global economic recovery remains uneven and conditions for sustained growth appear to be fragile.
  • SA manufacturing rose by a modest 0.3%m/m.
  • Overall, we expect manufacturing activity levels to soften over the next few months, especially on an annual basis.
  • Offshore, US government revenue is responding to the improvement in economic activity and is now up 25%y/y.
  • The US fiscal deficit is slowly improving, but remains substantial relative to GDP.
  • US housing activity has been exceptionally weak.
  • The IMF revised up their world growth projections for 2010 and according to them, the world economy expanded at an annualised rate of over 5% PPP basis (Purchasing Power Parity) during the first quarter of 2010.
  • US consumer credit declined by a further $9bn in May 2010, much more than expected. This follows a heavily revised decline of $14.9bn in April.

To see the full review, Read on….

Estate Planning Esentials – The farmer and his will

A farmer’s will often tries to accomplish the equal treatment of family members, yet the wording of a will often leads to unenforceable wishes and major liquidity shortfalls in the estate.
Issues that need to be discussed in full with the farmer before the will is drafted are:  Read on…..