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may 2016

the globe

in this issue

     market indicators
        editorial -
michael haldane, managing director
spotlight - peter haupt, IFA & branch manager (cape town)

Markets are fickle and based on much emotion and world tendencies and trends - just like a roller coaster ride

market indicators
  • The FTSE/JSE ALSI (+1.7%) gained, led by a strong rally in the resources sector (+13.2%) in April
  • Food and general retailers outperformed on news that domestic inflation eased to 6.3% year-on-year in. Inflation expectations remain critical to the sector with consumers burdened by rising debt and fuel costs
  • Commodity prices spiked, with oil settling above $45/per barrel and platinum breaking through $1000/oz in April
  • Rand strength in April (+3.8%) continued on US dollar weakness, buoyed by rising commodity prices and the relative attractiveness of emerging market assets and currencies.
  • The US dollar weakened against most major currencies for the second consecutive month signifying the market’s concern that the Fed may not this year achieve its own modest interest rate targets
  • Globally Healthcare (+3.2%) and financials (+3.1%) stocks rebounded along with oil and commodity driven sectors, materials (+7.8%) and energy (+8.2%), While technology stocks (-4.1%) performed worst as index heavyweights, Apple, Alphabet (Google) and Microsoft, delivered results that fell short of investor expectations
  • Global equities (+1.6%) advanced as commodity price gains
  • First quarter Eurozone growth surprised on the upside, Portugal (+3.3%), Italy (+2.8%), Greece (+3.2%) and Spain (+5.2%)
  • Emerging markets (+0.6%) underperformed despite encouraging Chinese macroeconomic data and strong market gains from oil and commodity producing countries, key oil importing emerging market constituents (China, South Korea and Taiwan) lagged
 

editorial
notes from the philippines 
words by michael haldane, managing director
 
Dear Friends,

This feels like the first day of winter a chilly 8 degrees today and Peter, in our Cape Town branch, tells me it's rainy and windy in Greenpoint. I just got back from a trip to the Philippines, where the average temperature was 34!

As an investment advisor I enjoyed it a lot seeing it through financial eyes. Here are a few facts I thought you would enjoy:

 
  • Filipino pensioners get 1500 pesos a month (around R500) and free medical care at government hospitals.
  • In Cebu, all pensioners get a cake on their birthdays. Our tour guide was really excited as her grandmother is 97. At 100 years old Cebu City will give her 100 000 Pesos (around R34 000)
  • Around 11 million Filipinos work outside the country. This is around 9.3% of the population. Many of these are blue collar jobs such as domestic helpers and caregivers.
  • These overseas workers contribute 13.5% of the country’s gross domestic product or over $20 billion a year.
  • Much of this money is sent back to the worker’s families each month. We met Aldo who lived in a shack with his wife and six children with no power or water. His wife’s sister worked overseas. Her monthly remittances were used to maintain Aldo and his sister’s family.
  • Filipino public transport system, other than buses and trains, are Jeepneys.
  • This is a unique form of transportation. Jeepneys were originally made from U.S. Military Jeeps left over from World War 2. The word jeepney is a combination of jeep and knee. As it takes about twenty people knee to knee! There are 300 000 plus of these in the country. They have writing on the side showing where they start and stop. The fares are really low and are often done up like you will not believe, with chrome shined up to dazzle, tassels and a multitude of horns. I felt at home as they are like our very own minibus taxis - they stop wherever they like and totally disregard the law.
  • Their other transportation is a motorised tricycle. They are an indigenous version of an auto rickshaw. Picture a motorbike with a canopy and a sidecar that takes 4 people with adverts all over it. We tried one and it was really thrilling, if not a bit cramped!
  • Their politicians are as corrupt and outspoken as ours. They are having an election in the next month and I have never seen so many election posters. A leading candidate, who is as outspoken as Julius Malema; made a terrifying remark in favour of rape. The papers went crazy but he still went ahead in the polls.
  • The squatter camps and poverty are terrible. Multi-level shanty towns are squeezed in everywhere. But very little litter and not many beggars. They seem to be a people that care for each other and have strong morals and ethics.


Near our hotel in Manila is an old Spanish fort. On our walk there, we passed many people on the side of the roads sleeping in hammocks stretched between trees. One image that will stay with me is two little boys playing with two cans under their family hammock.

My final word on the Philippines is the generosity of a guy from Norway that moved me greatly. Aldo, who I mentioned earlier with his six children, was our ship captain on an island hopping exhibition in Cebu. We were out looking for a restaurant one night and this little guy comes up to me and nicely pesters about hiring a boat and going snorkelling and island hopping. I vaguely showed interest and found a restaurant and ditched him. Two hours later he was still there so I said yes. The night before the boat trip I texted him to confirm and he did. Next day he walked us to the port and took us on a wonderful day's outing. In the course of the day I learnt his story. A few months before this, a Norwegian guy befriended Aldo. The Norwegian then paid for a 15 metre boat big enough to seat 20 to be built. This cost him 300 000 Pesos (R100 000). This he gave to Aldo so he could start a tour company and earn a living. Now he hires his three cousins as crew and his 18-year-old son. We were his second clients ever and the four of us had this big boat all to ourselves.

At the end of the day when I paid him the reasonable fee he almost broke down crying. His son was speechless when my wife also tried to tip him. We were really humbled that day. My daughter, Emily, so much so that’s she’s helping him develop a website and get onto trip advisor. The lesson I learnt from that is rather give someone a means to earn money every day. In our situation in South Africa unfortunately our SETAS have failed us in training people in trades such as electrical engineering and plumbing and our social welfare system is causing many people to depend on the state and not try to earn a living on their own. However, our waste disposal guys are amazing, every day at sparrows emptying bins for anything of value and providing for their family that way.

That’s enough for the month. Hope you all have a great month of May.
 
Cheers.


'so many financial dreams are thwarted by the failure to act upon good intentions.'  
― suze orman


 
http://www.economist.com/news/world-week/21698716-kals-cartoon
 

spotlight                                                                                                                         
calm heads & diversification
words by peter haupt, IFA & branch manager - cape town

Much has been debated over many years regarding investing for the short, medium and longer term. This in itself provides many conundrums because the three time periods are extremely different in their approach to decision making and the timing thereof. At Global & Local our focus has always been on the longer term and the general trends over time.
 
There are numerous requests from clients that have a shorter time frame, such as the 20-30 year olds, who tend to focus on shorter term growth, that achievements are attained over a 12-36 month period. Then there are the older generation who focus on sustainable growth in the longer term. It is not surprising therefore that our philosophy is more appropriately focused on the age group of 50 years and older.
 
However, much to my surprise, there is a new younger generation that has set their retirement goals on the example set by their parents of not having provided sufficient savings for retirement, and these younger generation investors have got it 'spot on'.
 
Notwithstanding the time line of the various different age group of investors, the focus due to this factor, as well as the market volatility and the age of information technology, there are those who may well be enticed by changing of funds into which they are invested, in short duration spurts. For example, if a fund does not perform in a 3-6 month period, then switch it to one that has performed over the same period.
 
You might have more luck by choosing funds in a darts match. This approach is both highly risky as well as potentially the incorrect move. This is explained best by looking at economic cycles and the understanding thereof. But understanding cycles and timing the cycles correctly are two very different aspects of planning. As everyone has witnessed of late is the volatility of the Rand. It was not predicted that the Rand would crash in December, nor was it predicted that it would appreciate recently. Likewise the markets are fickle and based on much emotion and world tendencies and trends. Just like a roller coaster ride.

 

Taking all of the above into account, it remains our philosophy that calm heads are needed in time of extreme turmoil and volatility and there is no need for huge changes to portfolios in these trying times. If the fund managers and their mandates and expertise are decided upon appropriately, then to make major changes in difficult times could prove extremely costly in the future and jeopardise the investment value to the detriment of the investor.
 
As examples of this philosophy of staying the distance, client A invested in a spread of funds in 2012 through our Cape Town branch. These funds ranged from Allan Gray, Coronation, Foord, Investec, Nedgroup and Prudential, being our Houseview in 2012. From that date until now, only a small portion of the funds (less than 6%) were moved between the one Allan Gray fund and a Prudential fund. The original investment being approximately R171 000 and after all fees and charges has grown to R263 000. This has provided an average growth well in excess of inflation at over 12% per annum.
 
A second completely separate client has had exactly the same fund spread since inception of his investment in 2013 (our Houseview fund spread in 2013). The original investment being some R182 000 which is now valued at R236 000. This has provided a nett growth of some 10% per annum.
 
As economist Rudi Dornbusch put it, “In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”
 
Thus the advice that we provide is simple, plan for the longer term, keep calm, and ensure that you are well diversified by using, amongst our other alternative options, our Houseview fund spread. This provides a vast diversification between classes of assets, domestic and global spread as well as fund house spread.
 

We will continue to forge our way forward together and we thank you for entrusting us with your hard earned savings.
company news
annual client investment seminar - johannesburg south
On May 11th our annual Client Investment Seminar, hosted by Allan Gray was held at Lenasia’s Varachia Hall and was in great attendance. Our Operations Manager Mauro Forlin who was MC at the event, gave an insightful introductory speech about Global & Local’s beginnings, growth as well as future. He was then followed by Rubicon Trust Company’s André du Toit, the Director and Senior Estates Practitioner who made all who were present aware about the importance of wills. The main speaker for the evening, Raymond Mhere, who is Allan Gray’s Regional Manager gave a great presentation about investor behaviour as well as a clear economic overview of domestic and foreign markets. He also included the Allan Gray story in his presentation and how they partner with Global & Local. A big thank you to all those who were able to join us for such a successful evening and we’re looking forward to next year’s presentation.
 
contact us
Global & Local
investment & retirement specialists

175 barry hertzog avenue, emmarentia, johannesburg 2195

t | +27 11 486 2500   
f | +27 11 486 2915

admin@globallocal.co.za 
www.globallocal.co.za 
 

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Directors: MPA Haldane (BCom) (HONS); MA Forlin (Ndip) CFP®
Global & Local® Investment Advisors (Pty) Ltd. Vat: 4550261574 Registration 2006/002605/07. FSP 43286

 






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Global & Local · 175 Barry Hertzog Avenue · Emmarentia Extension · Johannesburg, Gauteng 2195 · South Africa