Newsletter – Week 24 2024 – The Economics of Elections

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.  

Dawn is going to be hosting Michael Avery’s Classic Business Radio show on Fine Music radio next week. You can stream it off the FMR website or catch it on DSTV 838.   

Market watch

There were no dramatic movements on the JSE last week and the doomsayers have mostly climbed back under their rocks for the time being. Shares are an important part of any portfolio – even local shares, but you can’t escape from the fact that many of the new economic and business growth opportunities just aren’t found here so at least part of any share portfolio should include offshore assets. (Cobie goes into this in more detail in his focus piece this week).



In case anyone hasn’t woken up to the threat of the growing global trade wars, it might be inconvenient to remind that it is centred around that concept that most of us Saffers would like to forget, BRICs. As more attention falls on India as the new Eastern Tiger, their behaviour is going to come under more scrutiny. You might have asked over the years why Russia was getting all down and dirty in Iran – may be it has to do with Geography? 

Russia has announced plans to export coal to India using Iran’s railways. This announcement was made during the BRICS transport ministers’ meeting at the 27th St. Petersburg International Economic Forum .

Russia will use the International North-South Corridor (INSTC) to send coal to India. 

Then there’s Russian Oil

Russia’s invasion of Ukraine in February 2022 led to severe bans or restrictions on Russian oil from the West. Meanwhile, other nations – including China, India, and Türkiye – opted to deepen trade ties with the country. The graphic below illustrates just where the Russian oil is going now.


Universal Health coverage

With all the talk around the NHI, as if it was the panacea to all RSA’s health care – we’d be forgiven for forgetting that we actually already have Universal Health Care – and have had for decades.

The problem is that thanks to incompetence and corruption, that R350Bn allocated each year is squandered, and rather than fixing the existing, broken, system, the (now diminished) ruling party want to bring private heath care down to the same level.

Spare a thought for the US citizens who do not have access to Universal Health Care (nor the same level of basic labour protections that we take for granted). The NHS in the UK is hardly a shining example of what UHC should look like with waiting lists for things like hip replacements lasting years, and even time-sensitive treatment like chemo or radiation therapy for cancer delayed.

Perhaps this new GNU will at the very least put the breaks on some of the socialist/communist aspirations (like the NHI and AWC) of the former ruling party.
Bond volatility

Historically bonds – especially long dated government bonds –  have been used to add stability to a wealth portfolio, but the last couple of years has seen a very rocky ride in the US bond market. I think we sometimes equate the bond market with money market but there is one glaring difference – when yields rise then the capital (value) of the bond decreases to make up the difference so that they remain liquid on the resale market. In other words you can lose capital on bonds – just like you can with shares. 

Last week saw some of this volatility that should sound a cautionary note to investors in this market. 
Almost out of the blue, following on the of sub-par auctions of bonds the US Treasury sold $22BN in 30Y paper. The stellar auction sparked a fresh round of bond buying and sent 10Y yields not only to session lows of 4.22%, but also to the lowest level since the end of March, which means that the 10Y is now almost 50bps from the most recent high of 4.70% hit in late April.


New trend – Ghost posting of jobs

Amid complex hiring processes, a shadow is spreading in the American business world. Companies are using fake online job openings to project an image of growth, keep existing employees motivated, and cultivate a pool of possible future candidates with no intention of hiring.

The practice is commonly known as “ghost posting” and it accounts for 43 % of online job openings across multiple industries. A Clarify Capital survey (in the US) of more than 1,000 hiring managers showed that, beyond fake growth metrics and productivity drivers, one third of professionals claimed they used ghost posts to placate overworked employees.

The phenomenon has caused universal frustration on both the applicant and hiring side. On average, it can take up to eight weeks for a job seeker to receive an offer after submitting an application online, according to job listing site Indeed. The process often includes resume tailoring, lengthy applications, and multiple rounds of interviews. That means applicants are wasting hours trying to get hired by companies that aren’t actually looking.

Many hiring professionals say ghost posting hurts businesses that are actually trying to recruit new talent. Creating a pre-qualified pool of candidates for future openings is why 37% of surveyed hiring managers say they ghost post, but some argue it’ll have the opposite effect. Often the recruiter didn’t seem concerned about the candidates’ quality or level of interest, they were just looking for contact information.

There are numerous  incidents where professional candidates with perfectly matched skills suddenly face radio silence from hiring managers, only to find the exact job with the same ad posted on repeat every few weeks. Tech companies, recruiters, and staffing agencies are among the biggest ghost posters.


Global election updates

Last week France joined the global election bandwagon. Interestingly, France’s left-leaning parties will join forces in the upcoming election, with polls showing the new alliance may form the second-biggest bloc behind Marine Le Pen’s National Rally. It’s a further blow to Emmanuel Macron’s chances of emerging from the election with a firmer grip on government.

In a surprise poll, Nigel Farage’s Reform party took 19% of support in a YouGov poll, beating the Conservatives by one point. This emphasises the fall from grace of the Tory party in the last 3 years. Farage? Really?  The Labour Party was well in the lead on 37%.



Unfortunately, as wealth managers we always have to look at politics because they have a direct impact on economies – locally and abroad. While our new political scenario beds down and parties face the reality of actually having to work together, is there really the possibility of things getting better?

The Government of National Unity (GNU) is really just a big coalition – quite rightly leaving out the extremists who would love to be in the position of ‘king maker’ – where a minority wields far more power than it deserves because it can sink the coalition. (The most fragile coalition of all must be KZN).

The GNU has got a brief 5 years to stop digging the hole the ANC has put our country in, and start working it’s way up to daylight. Unless the GNU becomes more ‘business friendly’ it is unlikely to have any lasting impact- can the DA push this through?. Disappointingly, so far, there has been no talk of increased privatisation nor the return to the government living within it’s means – i.e. making better use of the taxes already collected from the over-burdened tax payer instead of running up the overdraft and trying to get more through the back door (NHI, wealth tax, prescribed assets etc). Maybe it’s ‘softly softly’ until the dust settles?

From an investor’s perspective don’t make any knee-jerk reactions. If you’re investing offshore, bide your time until there is a better exchange rate (this is something we help our clients with all the time). Offshore exposure is a good idea in all portfolios – and you don’t necessarily have to move your funds offshore to do that.

Remember that one can get global exposure but without necessarily sending money offshore. Rexsolom manages a Worldwide Flexible Fund which is majority invested offshore but which one can purchase locally. The Unit Trust Fund can protect against ZAR weakness but also provide exposure to global equities without having to transfer capital offshore.



This US company, probably best known for the Photoshop app has been an interesting participant on the fringes of the AI trend. On Thursday they produced better than expected results which resulted in a 17% share bump. Last week they issued new terms and conditions around it’s latest release of it’s creative apps. Firstly users are prohibited from using previous versions that they have purchased and must subscribe to their new online model. As if that wasn’t enough, buried in the small print Adobe have now given them the full rights to all creative content on their platforms to use as they please, bye-bye copyright. Watch this space for more fireworks to come. Sounds like they might have got too big for their britches and have a klap coming (but it looks like they will quickly and quietly retrace). 




From time to time, investors would call me to ask where I believe a currency will be in 6 months from now or where a market will be priced in the future. The reality is that I have as much information at hand as what most investors have. My insight is at best a guess rather than an insight which only I possess. The reality is that markets are very efficient in pricing in all the information that is known at a point in time. I am always amazed how a share price will settle at a value post earnings which is close to what we would calculate as a fair value. You see once the new earnings information is known it is quickly reflected in the price of the stock. Much the same with a currency or a commodity price. The only tool we possess that others don’t is a process for understanding a business.

It’s the relentless application of this process to equities in various countries and sectors which if you look long enough will start throwing up distortions. The more we look at South African equities we are reminded how difficult it is to flourish in South Africa. With a relentless onslaught on many fronts, many companies are merely trying to survive rather than thrive. Take property companies for instance. Governments stopped providing stable cost effective power and a safe environment for property owners. As a property owner you are forced to not only become a power producer but also provide your own security. At the same time, you are a sitting duck for hikes in tariffs and your value of your asset is hampered by all the talk of expropriation without compensation.

It’s no surprise that property companies are under threat. They are not the only ones. When we look across the board at SA equities, many companies are struggling to show sustainable ROICs (Return on Invested Capital). Here are some 10 year ROIC averages as an example: Bidvest: 10%, TigerBrands: 15%, Oceana: 10%, Shoprite: 8% and Barloworld: 12%. SA Cash gives you a current return of about 8% and that leaves very little upside for these companies to plough cash back into their businesses to create excess returns. It by default leaves you as a shareholder exposed to companies which at best will tread water. So South Africa isn’t a cheap investment destination if one looks at the broader picture.

Jurrien Trimmer from Fidelity makes the point that the top 10 companies listed on the S&P500 has outperformed the bottom 490 if one uses as a starting point share price values as at the pre-COVID peak.  This is illustrated in the following graph:

There is a 2100 point difference between the two groupings and with trailing y-o-y earnings going from -2% to +6% this is starting to form a base from where the laggard group can start catching up with the top 10. How do these ROICS compare? United Health: 18%, Visa: 20%, Costco: 20%, Johnson & Johnson: 25%, Procter and Gamble:15%, Home Depot: 35% to name a few. Not only are these ROIC numbers in Dollars but also consider that these companies are global enterprises. They are not only superior return generators but can also harness the power of global reach. Also consider that the risk free rate in the US today is at 5%. If rates reduce it will create room for higher returns. These companies are more expensive than their counterparts elsewhere but then there is a reason why this is the case.   

Author:- Cobie Legrange


The Rand/Dollar closed up  at R18.37 (R18.90, R18.87, R18.42, 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 also better at R23.37 (R24.18, R23.98, R23.46, 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 well up at R19.67 (R20.59, R20.42, R19.97, 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 up at $82.30 ($79.91, $81.73, $82.16, $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.) Although the price of Brent is up – the exchange rate is better so the price at the pump should not change much next month.


Bitcoin was at $ 66.975 ( $71,257, $68,362, $69,391, $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.