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Economic Overview

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  • 13 June 2023

    To understand why South Africa (SA) will not become a failed state, it is important to understand how we differ from states that have failed. States like Yemen, Somalia, and Syria. According to research conducted by Fund for Peace, countries that we often ascribe failure to, like Zimbabwe and Venezuela, are not extreme cases of failed states. But before we address the question of SA’s failure, it might be worthwhile to distinguish between a state and a government.

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  • 7 June 2023

    Over the last couple of years, we were often asked by both local and global investors if South Africa will become the next Zimbabwe or Venezuela. Today, this question seems more relevant than ever but, still, the answer remains an unequivocal no. As bad as things have become, there are five specific forces that work together, like reinforced concrete, to keep us from falling into the abyss. These forces are:

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  • 7 June 2023

    A favourite pastime of ours is wandering the weekends away at our local market, where we venture from one booth to the next hoping to find a hidden treasure or a bargain that simply cannot be ignored. As portfolio managers, we are in the privileged position to do the same during our weekdays, except that we spend considerably more time at each company’s booth speaking to the right parties and weighing up all the intricacies before making a decision.

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  • 1 June 2023

    Warren Buffett once said that a prudent investor should “be fearful when others are greedy, and greedy when others are fearful”. This sounds rather easy, but it is much more difficult to apply in practice because of the nature of uncertainty. Even though historic analysis gives us a fairly good indication of the potential outcomes, we, as humans, often complicate decision making by adding too many what-ifs.

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  • 23 May 2023

    In 2007, on the eve of the global financial crisis (GFC), Hilton Worldwide announced that it was being bought by the private equity (PE) behemoth Blackstone. After the acquisition, Hilton’s fortunes changed abruptly under its new owner. Almost overnight, Blackstone managed to double the amount of Hilton rooms while tripling its own return on investment. Hilton Worldwide is only one of many PE success stories.

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  • 16 May 2023

    Over the past year, the rand has been battered and it seems as if there will be no relief any time soon. Consequently, we have had to revise our year-end USD/ZAR forecast up from R16.50 to R17.50 and we will consider taking money offshore for our clients at R18.00 levels.

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  • 9 May 2023

    We all know the age-old adage that has held true throughout history: “It is not about timing the market; it is about time in the market”. As investment managers, we have the pleasure of celebrating the wisdom of this adage with our clients when they achieve their long-term investment objectives. Unfortunately, we also witness the flipside of the coin, when clients sell out of underperforming investments and buy into the flavour of the month based on short-term return differentials.

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  • 4 May 2023

    “We believe in what people make possible.” This is the slogan of one of the fastest-growing companies in the world, Microsoft. Currently, Microsoft seems to be achieving feats beyond what is possible. Growth within the world’s largest economy, the United States, has recently slowed down. Gross domestic product figures show that the number of goods and services created in the last quarter registered the weakest pace of expansion since the second quarter of 2022.

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  • 25 April 2023

    The global economic landscape has been experiencing a tightening cycle for roughly a year, and it is becoming apparent that its effects are both spreading and deepening as disequilibrium becomes more apparent. Recently, we have also experienced that the banking system is likely to be a contributor to the damage being done.

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  • 18 April 2023

    Theoretically, it is not difficult to grow an economy. But practically, it is a nightmare to execute. Although there are many ways to approach economic growth, I would like to focus on the collective ideas of improving the ease of doing business and facilitating sound money. Overall, these collective ideas can encompass most of what is needed to sustainably grow the South African economy. However, knowing what to do, or even how to do it, is not as important as knowing why you are doing it. We should have more capitalist collectivism and less bureaucratic collectivism.

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  • 12 April 2023

    To understand why more interest rate increases in South Africa (SA) may not effectively combat inflation, one must first understand the broader economic factors that contribute to higher inflation rates in emerging countries when compared with developed nations.

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  • 6 April 2023

    Welcome to the world of banking crises, where there is a consistent flow of money and the stability of a shaky Jenga tower! Here, banks can go from being the pillars of the economy to crumbling ruins faster than you can say “subprime mortgage”. So, grab your wallets and hold on tight as we unpack the events that unfolded in March.

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