Newsletter – Week 20 2024 – US markets hot new highs

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Market watch:

The US markets have been on a tear, making new highs (more about that later) but the JSE is also seeing a nice run. Remember if you’re invested in shares, a growth portfolio, these returns do not go in a straight line – even more especially on the JSE. Shares have a long lifecycle, longer than 7 years, and you have to be patient and let time do the work. If you want certain returns with less volatility, then you’re going to have to diversify into stocks and bonds, where bonds quell volatility over time. Remember though that you will be giving up some returns for lower volatility and the balance between these is best set by a qualified advisor who understands your objectives.



NHI Bill signed into law

This topic has obviously been all over the news in the last week as Cyril signed the document on Wednesday in an unsubtle election ploy. I have written extensively on this topic, so I won’t bore you by repeating it all here (you can read it here) but let’s try and put a positive spin on this.

Now that Cyril has signed this into law, the numerous court challenges can begin. There are at least 7 Constitutional challenges on the bill alone. While I am still of the opinion that if this bill is fully implemented it is going to devastate the economy, I still think that we are years, maybe even decades away from seeing this implemented (by which time, hopefully, the ruling party will be ousted and the Bill binned).

Before anything can be done the systems of patient records is going to have to be written – they have been trying to do this for 7 years and each pilot site has failed. If this system is implemented it is going to be a ‘postcode lottery’ like it is in the UK, where you will be assigned to the closest hospital and doctors to you. Unfortunately, an international medical aid is not going to help you in an emergency (heart attack, stroke, accident). Apart from perhaps taking better care of your health, the only other thing  that you can do at the moment is to support the people using the courts to get this bill thrown out. The largest Medical aid in the country has been uncharacteristically silent on this matter – perhaps they want the job of administering this mess?  Our good friend Michael Avery chaired a very interesting panel on this topic. 

In short, don’t panic – but put plans in place. Having an offshore nest egg is a good start (and something we at Rexsolom can help you with – and you don’t need hundreds of thousands to get going). 


Wealth Tax

In another disappointing bit of election posturing, Rise Mzanzi who showed such promise came out in favour of a wealth tax (because – and I quote “There aren’t enough taxes to pay for everything” .)  
He claims that R300m can be raised from this tax, an effective 0.5% pa of assets. A nice thank-you to Rebecca Oppenheimer for her R15m donation.

Wealth tax obviously plays well to working-class and unemployed voters and is only found in 12 countries around the world (mostly in Europe). It isn’t proving to be the windfall those 12 countries thought it would be contributing around 1% on average to the fiscus. There is one big problem with wealth tax – it disadvantages the savers in favour of the spenders. Is that the right message to be putting out there?


Spenders will increase the GDP of the country where personal consumption expenditure, even in RSA, is over 60%.  Pensions (investments controlled by the Pension Fund act, including RAs) are unlikely to be affected – so a simple solution will be to max out and ring-fence your pension investment, sell your house/s and rent and spend your children’s inheritance. Trusts are another obvious solution. I doubt that this hair-brained idea is going to gain traction – but you have a vote. Use it wisely.   


African wealth demographics

56% of Africa’s millionaires and over 90% of its billionaires lived in just five countries in 2023 – South Africa, Egypt, Nigeria, Kenya, and Morocco, according to The Africa Wealth Report 2024 . 135,200 people owned wealth of $1 million or more living in the continent that year, as well as 342 centi-millionaires worth $100 million or more and 21 billionaires.

In the above chart, South Africa had the highest number of so-called high net worth individuals (HNWIs) with 37,400 millionaires, 102 centi-millionaires and 5 billionaires. It was followed by Egypt with 15,600 millionaires, 52 centi-millionaires, and 7 billionaires, while Nigeria placed 3rd on the continent with 8,200 HNWIs. According to the report, , approximately 18,700 high-net-worth individuals have left Africa over the past decade (2013 to 2023). There are currently 54 African born billionaires in the world, including one of the world’s richest, Elon Musk

Most of these individuals have relocated to the UK, the USA, Australia, and the UAE. Significant numbers have also moved to France, Switzerland, Monaco, Portugal, Canada, New Zealand, and Israel.

New records in the US

The Dow Jones Industrial Average (a laggard among the major U.S. stock indexes this year,) got its moment in the spotlight on Thursday as it briefly broke above 40,000 points for the first time in its history.
The record on the Dow – as well as fresh records on the S&P 500 and Nasdaq earlier this week – come as investors grow more confident that the U.S. is heading for an economic soft landing, where the Federal Reserve is able to tame inflation without badly hurting growth.

A stronger-than-expected earnings season has also helped propel stocks higher, with 77% of companies beating estimates, compared to 67% historically. While Dow components are weighted in the index by their share prices, S&P 500 stocks are weighted largely by their market value. The relatively infrequent changes to the Dow means it sometimes may be slower to include some of the hottest companies.

Some $89 billion in assets is benchmarked to the Dow, compared to $11.45 trillion pegged to the S&P 500, according to the S&P Dow Jones Indices annual survey of assets as of December 2023.

Still, the price-weighted index retains cultural cache: established in 1896, it is far older than the S&P 500, which was launched in 1957 and the Nasdaq, which was launched in 1971. The Dow outperformed the S&P 500 in eight of the last 20 years. This year, it is up 5.8%, compared to the S&P 500’s 11.1% year-to-date gain and the Nasdaq’s 11.2% rise.  


Watching smart investors

Billionaire investor Stanley Druckenmiller, head of the Duquesne Family Office, sees the artificial intelligence bubble as overextended. He has slashed some of his holdings in “Magnificent Seven” technology stocks, including Nvidia. He’s not alone. Other notable fund managers and company insiders are jumping ship and unloading their shares. 

A recent 13F filing reveals that Druckenmiller’s family office sold over 441,000 shares of Nvidia Corp. in the first quarter, reducing its stake to only 176,000 shares, or worth just about $158 million. Since 13F filings are backward-looking, the firm may have further divested or adjusted those holdings since the first quarter.

Druckenmiller concluded: “I just need a break. We’ve had a hell of a run. A lot of what we recognized has become recognized by the marketplace now.”  


Jim Simons 

Most investors know the likes of Warren Buffett and Charlie Munger from Berkshire Hathaway fame. Some may even have heard of Peter Lynch, Seth Klarman or Bill Ackman… that is if you study markets. But most have never heard of Jim Simons. It’s for this reason that I thought it a good idea to spend a bit of time exploring the man that brought Renaissance Technologies and their flagship fund, the Medallion Fund, to the world.

Mr Simons who famously hated to wear socks, only came to finance in his 40’s having worked as a code breaker for the US government during the Vietnam World. Make no mistake, Mr Simons was a very gifted man. He earned a degree in maths from MIT in 1958 and then went onto a PHD in the same discipline from the University of California, Berkley. After being forced to leave his life as a code breaker due to his opposition to the Vietnam war, he spent part of his life as an academic where he started looking more closely at market data. It was in 1988 that he founded Renaissance and launched the Medallion Fund. This fund became a rocket ship for returns earning 40% returns between 1988 and 2023. They did this as a quant hedge fund at a time when some of the smartest people in the business were going bust. In 1998 the famous blow up of Long term Capital Management occurred as an example.

Whereas most investors rely on fundamentals, Mr Simons relied on pattern recognition and trends to create a super track record. The genius in this process is that he identified the mathematical relationships required for excellence when computing power was still in its infancy. It therefore goes without saying that he was able to identify and exploit ideas that few probably even knew existed. To this day, most people still don’t know exactly what happens at Renaissance, but it is well worth noting that Mr Simons always relied on hiring those that are smarter than him and often from fields quite different from finance.

To the latter part of his live he created a foundation where he gave away most of the $32 billion he amassed. He was publicity shy but people that knew him called him a giant soul concerned with humanity and the plight of others. An interesting life indeed and one that most investors don’t even know about.            

Author- Cobie Legrange


The Rand/Dollar closed stronger again  at R18.26 (R18.43, R18.51, R19.09, R18.68, R18.99, R18.76, R18.72, R19.15, R19.30, R18.97, R19.03, R18.80,  R18.78, R19.03).   

The Rand/Pound is a tad better at R23.11 (R23.80, R23.22, R23.62, R23.61, R23.93, R23.90, R24.06, R24.18, R24.47, R23.61, R24.03, R23.87, R23.86, R24.15.)  

The Rand/Euro closed the week better  at R19.08 (R19.86, R19.92, R20.35, R20.25, R20.56, R20.43, R20.47, R20.71, R20.93 R20.38, R20.51, R20.38, R20.40, R20.72.)


Brent Crude: Brent closed the week slightly up at  $83.43 ($82.73, $82.82,$87.39, $90.87, $86.58, $85.33, $81.80, $83.80, $83.40,$83.14 $80.91, $77.36, $83.66, $78.33.) Unless the price or exchange rate changes dramatically over the week we could see a drop in the price of petrol and diesel next month. 


Bitcoin was up again at $66 328 ($60,880, $63,154, $64,135, $68,804, $64,681, $69,078, $68,340, $62,315, $54,649, $52,510, $47,195, $ 42,897, $41,608, $41,680).  

Articles and Blogs: 

Taking a holistic view of your wealth NEW
Why do I need a financial advisor ? 
Costs Fees and Commissions 
The NHI and what do 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.