| Cobie and I like to keep this newsletter and our podcast evolving. We’d love to hear from you about what you like or dislike, what you’d like more or less of – both in the newsletter and podcasts. Do you have topics you’d like to hear a blog on? Do other people’s wealth journeys interest you? The podcast of the newsletter is available and you can download it here. We welcome all your input so please don’t hesitate to contact us if you’ve got any queries or suggestions. Market Watch The JSE came off a touch after the Trump win but is still showing a healthy 19.07% year-on-year rise.  Wall Street is continuing to hit new highs following the Trump win, and this uplift could go right into a Santa Rally. By the end of January, the markets will be able to start to see what Trump 2.0 will look like. Just one example – the cost of deporting undocumented persons would cost at least $88bn a year, a trillion dollars over a decade. That excludes the impact on the economy.  Why did Trump win? It was the economy stupid! The COVID effect on the economy caused Trump to lose in 2020, and COVID was also the primary culprit in Harris’s loss. At the end of the day, US voters vote with their wallets, and the majority perceives that they were better off under Trump than Biden. (Of course they were; that was Obama’s economy, carefully built back after the Republicans destroyed it in 2008.) Donald Trump survived a criminal conviction, indictments, an assassin’s bullet, accusations of authoritarianism and an unprecedented switch of his opponent. Now, in an astonishing political comeback, he will be the next president of the United States. He is the first former leader in more than 120 years to be elected for a second non-consecutive term. This will be his last term unless he can overturn the provisions in the constitution, which would require a 66% majority. Trump’s defiant plans to upend the country’s political system appealed to tens of millions of voters. He picked up support among Latino and Black working-class voters, giving the Republican Party hope for a new way to win in a diversifying nation in the forthcoming years. Some voters saw him as their only choice to combat what they saw as out-of-control immigration or to bolster the U.S. economy. Others were compelled by the power of his campaign. However, many Americans still found him unappealing, and his victory may say more about the country’s dissatisfaction with Vice President Kamala Harris and the Democratic Party. The Democrats are going to have to reposition themselves by 2028 if they want to win their way back into governing the US. The Republicans also took control of the Senate, which allowed Trump to carry out his priorities more easily. Control of the House has yet to be determined. Trump will be able to dispense with federal criminal charges against him while postponing or derailing the state and local cases that threatened to send him to prison and wipe out his wealth. Jack Smith, the special counsel who charged Trump, has already begun discussions about winding down his cases. Harris conceded the race yesterday afternoon. “It is OK to feel sad and disappointed, but please know it is going to be OK,” she told tearful supporters in Washington. “Here’s the thing: Sometimes the fight takes a while.” In the second Trump win the US held up a mirror to itself, and they obviously like what they see. Racism, misogyny, criminality, and homophobia are all acceptable in the pursuit of filling the mighty wallet.  China – more worried about home-grown problems China did not announce much-anticipated steps to boost its flagging economy at the end of last week’s meeting of its legislature, despite the Trump win. Stock prices rallied sharply in late September but have since lost momentum. The blue-chip CSI 300 Index is still up 20% since then while the Hang Seng Indexis down nearly 10% from an October peak. While analysts say bold, multi-trillion yuan measures are needed to reinvigorate the world’s second-largest economy, which has yet to bounce back fully from the COVID-19 pandemic. Perhaps they don’t believe Trump, and might adopt a wait-and-see approach to proposed tariff increase and counter with their own measures and tariffs? The Chinese central bank loosened restrictions on borrowing in late September, sparking a stock market rally and the economy has shown signs of life in the last two months. Purchase subsidies offered to people who trade in old cars or appliances for new ones helped auto sales rebound in September. A survey of manufacturers turned positive in October after five straight months of decline, and exports surged 12.7% last month, the largest increase in more than two years. For most of the year, the ruling Communist Party appeared more focused on addressing long-term structural issues with the economy rather than short-term ones. Previous steps to boost the economy were piecemeal, seemingly aimed at keeping the economy afloat rather than sparking a robust recovery. In recent weeks, the party has signalled a growing concern about the economy’s sluggishness as it tries to meet its goal of achieving growth of around 5% this year. The central bank’s monetary easing was followed by government pronouncements that it still has ample funds to pump into the economy. Still, the longer-term goals of transforming China into a high-tech and green energy economy seem likely to remain the chief aims of the Communist Party, who of course don’t face election pressures like the ones that toppled the Democrats and swept Donald Trump’s Republicans to power in America this week.  The Magnificents reaction Shares of Nvidia (NVDA) rallied to a record high on Thursday, making the chipmaker the first company in history to surpass a stock market value of $3.6 trillion as Wall Street extended a rally sparked by Donald Trump’s return to the White House. The dominant AI chipmaker’s shares rose 2.2%, lifted by broad investor optimism about tax cuts and lower regulations after the Republican candidate’s Tuesday election victory. Nvidia’s stock market value now beats Apple’s record closing market capitalization of $3.57 trillion reached on Oct. 21, before the chipmaker on Tuesday overtook the iPhone maker as the world’s most valuable company. Have a look at the graph below, two years ago this share was at $16.33, it’s now at $148.88.  Nvidia share price Apple’s stock rose 2.1% on Thursday, leaving it with a market value of $3.44 trillion. The S&P 500 technology index has surged over 4% in the three sessions since Trump won the election on Tuesday. (update on Saturday) Nvidia has been the U.S. stock market’s biggest winner from a race between Microsoft, Alphabet and other heavyweights to build out their AI computing capacity and dominate the emerging technology. Following this year’s surge, Nvidia now exceeds the combined value of Eli Lilly, Walmart, JPMorgan, Visa, UnitedHealth Group and Netflix. Analysts on average see Nvidia increasing its quarterly revenue by over 80% to $32.9 billion when it reports its results on Nov. 20, according to LSEG. Tesla hit $1tn on the back of Musk’s new BFF getting back into the Whitehouse.  Careful what you wish for The dollar reversed much of its post-election surge by Thursday’s close, and is trading little changed on Friday. (update DXY chart Saturday). The DXY chart surged to over 105 on Wednesday ending the week a touch off 105 at 104.95), and the Rand (and almost every other currency around the world depreciated) in line with this, but the Rand soon recovered and by Friday morning the USDZAR was back at 17.35.  Treasury yields have also returned to recent ranges following a two-day whipsaw. These higher treasury yields are confirming the likelihood of higher rates for longer, and a new-normal higher inflation rate.  Chinese stocks and the yuan were earlier hammered by concerns over higher tariffs, but have since gained ground. The moves point to the potential for volatility as investors weigh whether Trump’s policies will match his promises on the campaign trail. (His follow-through on promises in the 2016 election was poor at best – so there is some hope) As the market jolt subsides, the focus is turning to other big events: the Federal Reserve’s easing path and China’s fiscal stimulus. “There’s a sense that even the most exuberant Trump Trade investors are taking a step back to think: at this point, are the bets overdone? A key question on investors’ minds is how much of Trump’s threatened tariffs — up to 60% on Chinese goods — will become a reality. The graph below shows that US imports from China are declining, but still at an eye-watering $427trn.  US imports from China As doubts start to creep in, assets seen as benefiting under Trump have largely moved sideways after the post-election pop. US stocks have been an exception, extending gains Thursday on speculation the new administration will be supportive for the nation’s companies. Bitcoin has been little changed since surging to a record thanks to the president-elect’s pro-crypto stance. The 10-year Treasury yield held at 4.33%, after the Fed’s rate cut helped pare some of Wednesday’s surge. Yet the trades may regain momentum. If the Republicans keep control of the US House, with the final counting still underway, the resulting sweep will smooth the path for Trump’s tax cuts, immigration and trade policies, as well as a confirmation of his nominees.  US debt and foreign entities Here is something that not enough people talk about, and clearly Comrade Trump doesn’t understand. China is the second-largest foreign holder of U.S. debt, with holdings of around $749 billion as of April 2024. Why does China buy U.S. Treasuries? • Diversifying forex reserves • Buying the reserve currency • Stability and safety Over the years China’s holdings have been decreasing, especially since 2018. In May 2024, Chinese investors sold a record amount of U.S. stocks and bonds, with Treasuries accounting for over half of the sales. As of April 2024, the five countries owning the most US debt are Japan ($1.1 trillion), China ($749.0 billion), the United Kingdom ($690.2 billion), Luxembourg ($373.5 billion), and Canada ($328.7 billion). Over the years the percentage of US debt held by foreign entities has grown from 5% (1995) to over 30% (2024) Two-thirds of public debt is held in the US and here is a rough breakdown:  What if foreign entities stopped buying Treasuries? Is this one way that China and Europe can strike back in response to tariffs? The U.S. government would need to offer higher interest rates to attract domestic investors, making borrowing more expensive for the government and consumers. The U.S. dollar might weaken as demand for it decreases, potentially leading to inflation. Higher borrowing costs could slow down economic growth as businesses and consumers cut back on spending and investment. It could create instability in global financial markets, as Treasuries are considered a safe-haven asset.  Social media Trump’s DJT stock sunk down to around $22 by Friday, but of course, with his buddy’s X platform at his beck-and-call, he doesn’t need it anymore (just bide his time and cash-in). Musk’s tweets over the last few weeks have been amplified out of proportion, and advertisers and users are abandoning it in droves. Musk bought the platform for $44bn and took it private, it might be worth $10bn now. What about Tiktok and other social media platforms? Biden in April signed the TikTok ban, which requires ByteDance—TikTok’s China-based parent company—to sell the platform by January 2025 or be banned from U.S. app stores. TikTok and ByteDance almost immediately challenged the law in the courts, filing a suit that said the law was targeted, unconstitutional and violated the First Amendment and that it is “not possible technologically, commercially, or legally” to divest in the time given. Trump, who became the president-elect in Tuesday’s election, previously signed an executive order in 2020 that would have functionally outlawed the app, but was blocked in court. Trump changed his tune in March after reportedly meeting with GOP megadonor Jeff Yass, who had a major financial stake in the app—he later joined the platform and vowed to “never ban TikTok.” Trump also claimed the ban would only help Mark Zuckerberg and Facebook, which he considers “an enemy of the people,” and he later campaigned on his support of TikTok, saying in September, “For all of those who want to save TikTok in America, vote for Trump.” The deadline for TikTok to sell or be banned in the U.S. is Jan. 19, one day before Inauguration Day, which could make it hard for Trump to interfere. Trump could refuse to enforce the ban and not punish app stores that continue hosting the app, but at least one legal expert told Politico in September it would be “insane” for a company’s general counsel to allow it to violate the law, noting “Trump is incredibly fickle.” If the ban goes into effect before his presidency begins, Trump could also try to repeal it with the help of Congress. As the law stands, TikTok would be banned from app stores in the U.S. on Jan. 19 unless the company divests from ByteDance. However, there was a stipulation in the law that gives Biden the power to extend the deadline by 90 days if he sees “significant progress” toward a sale. If that happens, the deadline would be extended into a Trump presidency. 14 million. That’s how many followers Trump has on his TikTok page, which was launched in June. Talk of TikTok bans began years ago as lawmakers scrutinized the app and expressed concerns of national security issues related to what ByteDance was doing with the data it was collecting on users. In 2019, the U.S. reportedly launched a national security review of TikTok after lawmakers “raised concerns about TikTok’s growing influence in the United States,” The New York Times reported. TikTok has insisted it does not and would not share data with the Chinese government, and has fought bans that have been brought at the state and federal levels. Despite the insistence it doesn’t share user data, Congress banned TikTok on federal devices in 2022, and more than half of all states also banned the app from being on state-issued devices. After Biden signed the ban in April as part of a $95 billion foreign aid package for Ukraine, Israel and Taiwan, When the bill was in the House, House Speaker Mike Johnson, R-La., said the bill was “an important bipartisan measure to take on China, our largest geopolitical foe, which is actively undermining our economy and security.” In its September hearing, the U.S. argued ByteDance’s ownership “creates a national-security threat of immense depth and scale,” although much of the government’s specific intelligence about why was redacted. This is going to be an interesting space to watch. Author: Dawn Ridler  The Republicans will stimulate Hate it or love it, either way Donald Trump is the US President. The Republicans are also in charge of the Senate and look to win the House as well. That makes for a red tidal wave with the Democrats now sitting in the opposition benches with not too much policy influence for the next 4 years (that is if the House also goes Republican). Markets cheered on the day with the S&P500 gaining 2.5% and the Nasdaq 2.95%. US 10-year yields jumped to 4.43%. Remember that the high point in this yield was at 4.89 a year ago. So with long-dated bond yields now rising in excess of their shorter-term counterparts at least we are now experiencing a more normal yield curve. It’s called a bear steepening and either means that the future holds more inflation than what current rates imply or that growth rates in the US will increase. The Trump philosophy is certainly pro-growth but foreign policy seems more problematic given his take on trade tariffs. I do think that the average Republican voter requires their lives to be demonstrably impacted by his policies to cement a continuing red wave. The average American’s life has been impacted by a rise in inflation, a stagnant property market (where most American’s wealth lies) and dwindling decent-paying job opportunities. It is this that caused the swing to the Republicans. Now while none of this is necessarily the fault of the Democrats, an “eye of the ball” impression of them left the populous feeling like they are much more concerned over issues such as equal rights and transgender issues. So when Donald Trump, despite his past missteps, promised to fix the real issues …people listened. Policy will change and I am sure we will witness Trump signing his flamboyant signature across many executive orders. This though is the difficulty with policy decisions alone as they take time to take effect. So it won’t come as a surprise that the US starts stimulating their economy again. History has shown this is the case when the House, Senate and Presidency are controlled by one party. The divide between politics, treasury and the FED has all but disappeared. It’s foreseeable that even the rudimentary balances that were in place before can now be sidelined during a red wave. So when markets are cheering, I believe this is the reason they are doing so. If you are looking for a cheap market, the US is certainly not the place to look. Stocks have moved to expensive now. But I also know that politically, the Republicans cannot afford an economical misstep especially after blaming the Democrats for the current state of the US. With over 350 companies having reported Q3 earnings, 76% are beating estimates and with business-friendly policies and the even hand on stimulus stocks could continue to go up. Author:- Cobie Legrange EXCHANGE RATES:  The Rand/Dollar closed at R17.58 (R17.60, R17.66, R 17.41, R17.48, R17.12, R17.42, R17.85, R17.82, R17.71, R17.85, R18.32, R18.26, R17.95, R18.23, R18.20, R17.91, R18.37, R18.90, R18.87, R18.42, R18.26, R18.43, R18.51, R19.09).  The Rand/Pound closed at R22.73 (R22.72, R22.89, R22.75, R22.93, R22.90, R23.20, R23.44, R23.41, R23.13, R23.39, R23.28, R23.32, R23.34, R23.00, R22.63, R23.37, R24.18, R23.98, R23.46, R23.11, R23.80, R23.22, R23.62)  The Rand/Euro closed the week at R18.85 (R19.09, R19.07, R19.05, R19.19, R19.12, R19.47, R19.79, R19.72, R19.80, R19.70, R20.01, R19.94, R19.58, R19.74, R19.49, R19.14, R19.67, R20.59, R20.42, R19.97, R19.08, R19.86, R19.92, R20.35)  Brent Crude: Closed the week at $73.86 ($73.99, $75.57, $78.67, $77.95, $71.96, $74.68, $71.47, $76.99, $79.05, $79.09, $79.43, $77.56, $85.03, $83.83, $84.86, $85.22, $82.30, $79.91, $81.73, $82.16, $83.43, $82.73, $82.82,$87.39). This is likely due to increased tension in the Middle East.  Bitcoin closed at $79,318 ($68,277, $66,989, $62,876 , $62,267, $65,596, $62,603, $54,548, $57,947, $63,936, $59,152, $60,847, $61,903, $59,760, $56,814, $61,436, $65,635, $ 66.975, $71,257, $68,362, $69,391, $66 328, $60,880, $63,154, $64,135). Articles and Blogs: Wealth creation is a balancing act over time NEW Wealth traps waiting for unsuspecting entrepreneurs Two Pot pension system demystified Keeping your legacy shining bright Financial well-being when dealing with Dementia and Alzheimers Weathering the storm Pruning your wealth farm Should you change your investments with changing politics? Taking a holistic view of your wealth Why do I need a financial advisor? Costs Fees and Commissions The NHI and what to do about it New-Normal for Retirement? Locking-In Interest rates – The inflation story Situs – The Myths and Reality Tax Residency – New Rules new headaches Are retirement annuities dead A new look at retirement Offshore investing – an unpopular opinion Cobie Legrange and Dawn Ridler, Rexsolom Invest, Licensed FSP 45521. Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za Website: rexsolom.co.za, wealthecology.co.za |