Newsletter – Week 9 2024 – Treading water until the elections?

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Market watch:

Although the base effects from this time last year is working out of the year-on-year stats the US surge at the end of last year – almost exclusively the magnificent 7 – is going to weigh on the comparison between the JSE and the US. 

Our performance doesn’t look quite as dismal if you compare us against the UK – but that is just cherry picking the graphs to paint a better picture. 

Japan, the third/fourth biggest economy in the world (swapping places occasionally with Germany) has had a stellar year:

This just shows you – don’t just consume the content that suits your narrative – the doomsayers or the cheerleaders – but try and look at all sides (as painful as that can be sometimes). Remember that stocks are so-called growth assets and one should have a long-term view of them in a portfolio and not react to every change. 

India and Global Competition. 

We think it is important to keep an eye on India as they consciously move to fill the void that is being left with the de-risking away from China, Sure, pundits like to call it deglobalisation, it sounds a lot less discriminatory, but the bottom line we all know it’s getting out of China specifically.

India’s economic growth in the three months through December was much higher than most estimates due to a sharp fall in key subsidies which provided a boost to GDP. This is an important move for India as this has always been a bone of contention in terms of global competitiveness. The EU is rife with subsidies which you can expect to come under increased scrutiny, especially as they force companies like Apple to have other platforms on their devices and the use of the C charger in Europe.

India’s economy grew 8.4% during the October-December quarter, its fastest pace in one-and-half years, and much faster than the 6.6% estimated by economists (polled by Reuters.) However, gross value added (GVA), which is a measure of the total value of goods and services produced in the economy and excludes indirect taxes and subsidies, grew 6.5%, prompting economists to say that GDP data overstated growth trends.

The wide divergence between the GVA and GDP in the October-December quarter was mainly due to a sharp fall in subsidies in that quarter largely because of lower payouts on fertilizer subsidies like Urea.
Government data showed fertilizer subsidies in the October-December quarter declined by nearly 70% to 307 billion rupees ($3.7 billion) from the same period a year ago.

As office tower vacancies continue to rise nationwide, many of these buildings are becoming economically nonviable workspaces, raising the question of what can be done with millions of square feet of underutilized space. Simultaneously, the US housing market faces a severe shortage, leaving investors and lawmakers to ponder whether underutilized office space can be transformed into multifamily buildings. Unfortunately, or maybe perversely, the value of these offices hasn’t fallen far enough to make the conversion into residential housing viable. It may mean that these office blocks have to go bankrupt and then be snapped up by developers for cents in the dollar for this to happen. (Bear this in mind if you hold REITS – Real Estate Investment Trust assets).The current vacancy is 14%, and still falling and is expected to hit 18% this year. part of the reason these conversions are not happening is the cost of finance – but this could come down later this year. Companies that own their own office space or are tied into long leases are pushing back against the WFH (Work From Home) trend in the premise that ‘team work makes the dream work’ and other dated homilies. Labour law in the US is not nearly as robust as it is in Europe or in RSA so they are getting away with changing the terms of workers’ contracts with impunity – for now. (Did you know that there is no legislated leave in US labour law, let alone paid leave? Ditto for maternity/paternity leave or sick leave? The Federal minimum wage is $7.25 an hour and hasn’t changed in 2 decades (States may have their own laws)?).

Brand Authenticity

WW International, previously known as “Weight Watchers,” crashed in premarket trading after the company revealed late Wednesday that media icon Oprah Winfrey will exit its board later this year. Winfrey’s exit from the WW board, which she joined in 2015, occurred about three months after an interview with People Magazine, in which she disclosed her use of a weight-loss medication as a “maintenance tool.” 

To quote Winfrey “The fact that there’s a medically approved prescription for managing weight and staying healthier, in my lifetime, feels like relief, like redemption, like a gift.”

Winfrey’s Brand which was built on Compassion etc has been on a steady decline, and this is just one more nail in that coffin, but it underlines the danger to companies that clamour for celebrity endorsement. It’s one thing when said celebrity falls out of grace which is completely unrelated to what they are endorsing, but this about-face by Winfrey has struck right at the heart of the key message of the brand – you can lose weight by reducing calories.  

The above graph shows Weight Watchers stocks against a (Goldman Sachs) index for companies that produce this GLP (Glucagon-like Peptide) compound found in most of these new drugs. These drugs cost around R2000 per month but unless there is a significant calorie-reduced diet after the course the weight very quickly comes back. 

. Its well worth noting that the trouble at Weight Watchers isn’t just a recent issue. Revenue has been under pressure for a decade as the company has attempted to fight for relevancy. They now promote “Weight Health” as one would think of mental health or heart health for example. Their acquisition of Sequence in 2023 will assist the company in entering the medical prescription business.

Dot Comm repeat?

Last week we spoke about some of the factors that are boosting the magnificent 7 – like Nvidia. Basically there is too much money with nowhere to go, and when that happens bubbles often form. There’s no doubt that artificial intelligence will be helpful… The markets once again are way ahead of the reality of where all of this is going, and at the same time, they’re overlooking the tremendous economic problems and financial problems that are hiding in plain sight.

Recent moves in the price of oil, mortgage rates, and treasury yields suggest these investors are overly optimistic. Market indicators are showing that inflation is tracking sideways and still not coming down to the desired 2% – is 4% the new normal – and if it is what are the implications for the US economy? 

What if the FED doesn’t start dropping rates in a few months, as expected, instead hike them? This is one of the concerns that is making the bond market so volatile. Once bitten, twice shy. The FED is not going to live down the fact that it took so long to raise rates, believing, mistakenly, that inflation was ‘transitory’. 

Is this really a restrictive monetary policy?  Is there any cutback in government spending? Is the US government borrowing less because the Fed has increased the cost of borrowing money? No! (Does this sound familiar South Africans?) The US government is borrowing more! In fact they’re borrowing more to pay the higher interest rates on debt outstanding.

With the US in an election year, there is the very real concern that the FED will be reluctant to ‘rock the boat’ and be seen to be favouring Biden or Trump – but November is a long way away and left unchecked, a lot can go wrong. 

America is addicted to cheap credit, and could this addiction cripple the economy if left unchecked? 


Retail Investors versus Professional Investors

Retail investors are the ordinary man on the street, in some circles, they are called ‘dumb money’ (Cobie and I would never be that crass).

Source : (Disclaimer: This is not an endorsement of ZeroHedge which is inclined to attract all sorts of conspiracy theorists, but there are some very good contributors there who don’t post anywhere else)

You can see from the above graph, that Retail Investors pile in during the end stages of bull markets, far outnumbering Professional Investors. This is FOMO at its best/worst. 



If you haven’t noticed yet, Bitcoin has pushed through $60,000 to record an all-time high. Not bad for an asset which some have branded as speculative and akin to a Ponzi scheme. As a matter of fact, the last 3 months have been a wild ride for Bitcoin holders as it traded at $26,000 in September and October before it amazing rush higher to $62,000. 

Bitcoin doesn’t have the technological bells and whistles that more modern crypto coins have, but it does have a halving process which other coins don’t have. In essence, the coins in issue halves every four years which reduces supply and should demand continue to stay strong, should make coins more valuable. If the latest price action is anything to go by, I would say that there is some truth to this. There is a limit to how many Bitcoins can ever exist – 21 million. This means that on an average day in Bitcoin land, new coins are minted as new blocks are added to the blockchain. This is how Bitcoin miners get rewarded. Why else go to the computational and energy expense to try and outdo your fellow mining competitors? The halving has the effect that miners are rewarded with fewer coins but that they get more valuable over time. When does all of this end? In the year 2140 or 117 years from now.

So love or hate it, crypto is here to stay and in a world where governments are debasing their currencies, crypto allows for a holding ground which is outside the FIAT currency system. The rise in Bitcoin has had the same effect on other crypto currencies as well. Take Ethereum for instance which is up 50% or Cardano which only managed to gain 40% over the past month. Make no mistake, crypto coins are still speculative assets. The technological space which underpins their existence is rapidly changing which could leave some of them worth very little. The whole space reminds me of railroad companies attempting to capture the great West in the United States. Fortunes may be made and lost, but at least everyone had an adventure!
Remember that placing your capital in crypto assets comes with a very different risk profile than buying solid companies with long-term track records in delivering. Yes, the meteoric price rise of crypto doesn’t exist when one buys the steady and boring, but on average you may find that over time boring on average wins. Again, understanding your own objectives and how various assets fit into this becomes important. What is right for one may be completely wrong for another.      


The Dollar was slightly down at  103.88 – probably the driving force behind the stronger Rand

The DXY Index:

The Rand/Dollar. The Rand/Dollar closed the week on R19.15 (R19.30, R18.97, R19.03, R18.80,  R18.78, R19.03).


The Rand/Pound is also better at R24.18 (R24.47, R23.61, R24.03, R23.87, R23.86, R24.15.)

The Rand/Euro closed the week at R20.71 (R20.93 R20.38, R20.51, R20.38, R20.40, R20.72.)

Brent Crude: Brent closed the week up again at $83.80 ($83.40,$83.14 $80.91, $77.36, $83.66, $78.33). Middle East tensions continue to weigh on the commodity price. There are negotiations afoot to suspend the Gaza war during Ramadan which would be positive for the price. Even the US is now considering air-dropping aid after thousands of desperate Gaza citizens stormed aid trucks last week, ending in tragedy.


Bitcoin was up again at $62,315, ($54,649, $52,510, $47,195, $ 42,897, $41,608, $41 680).

Articles and Blogs: 
New-Normal for Retirement? NEW
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.