NFB FINANCIAL UPDATE Volume49 April 2010
FROM THE CEO’s DESK
W
hen will somebody in the ANC hierarchy stand up and crap on Julius Malema? Nobody in post–apartheid South Africa should be allowed to carry on like this fool does. Describing a person, who misbehaves and acts like he does, no matter what his woodwork grade was, as a fool, does not imply he is stupid. On the contrary, he is street smart and is probably a product of a country which withheld education and, through crazy laws, broke down family pride and also family and cultural values. This in my opinion makes him very dangerous, as he lives in a place, much like some wannabe Zimbabwean cadres, who associate with previous struggle generations and act like there are no rules other than those which suit themselves and their cronies. This latest action, where he sings songs promoting certain people being harmed or even killed, cannot be described as being “quoted out of context”. This simply doesn't wash with a South African community which is striving to move on. He needs to be made an example of and I wish someone like the president, who himself could think a little about where the funding, trade pacts and tax revenue really comes from, would take him in hand and curtail his foolish and inflammatory actions. I also worry that he is resorting to the old “Kill A Boer” tactics in an effort to re-popularize himself amongst his powerbase, a relatively unsophisticated constituency, which Comrade JZ needs to bolster his own position. These people don't read the same newspapers we do and probably don't know half of what has been aired in the last few months about this so-called leader. We need this to happen so that the rank and file South African can see what he is up to and deal with this bully accordingly. In the marketplace, we have seen a budget (purposefully spelt with a lower case b) speech, come and go. Nothing noteworthy for high worth clients, other than the fact that bracket creep will impact as no relief was evident. The one worrisome fact is the deficit and the obvious need for the government to deliver to the constituents who voted JZ in to power. This is the link to Malema. The funding required is enormous and, whilst we find ourselves in a reasonably under-geared position, this is going to change. The fiscal deficit, combined with the funding needed to fund capital projects, is critical to keep a battered economy going, which, when combined with the capital market having to cope with banks, parastatals (read ESKOM) and corporate tapping it for rollover and recapitalization, will see upward pressure on the cost of long term money. We also need to watch the global inflation indicators for signs of rapid upward trending CPI and PPI data. This is one way the developed market governments can extricate themselves from the debt and deficit burdens they
have created through the rescuing they have had to do. If this does not happen, the opposite is possible with the fear of further failure; even Sovereign failure looming (read GREECE et al). I heard these Southern European cripples recently described as Club Med and thought this was rather apt. Or we could see a muddle through environment where, after a sluggish few years, we see resurgence in confidence and a return to buoyant economies. This is probable, but great care is necessary to avoid a radical slide into a Japanese scenario where so much pain was taken in the early 90's that no amount of stimulus over the subsequent twenty years has been able to restart this previously dynamic economy. I think the world will eventually recognize the new Governor of the Fed as a hero of this crazy period. He studied the Great Depression at 'varsity and the errors of that period were avoided by him and his team at the US Fed and US Treasury by acting fast, bravely and in unison with their global counterparts, thereby saving the day. Had this not happened, I fear the financial system as we know it, would have failed! So where to now? We believe that dividends, income streams and deep value propositions are the name of the game for the next years and perhaps decades. When liquidity returns, not to the banks but to the consumer (individual and corporate) and when big pension funds and investors come back in to markets, the shares and assets showing consistently higher earnings will benefit. We seek these shares, and also funds, focusing on them. We also believe that developing or GEM (global emerging markets) will outperform. These will also become more visible in portfolios. Having had lunch with the Global Head of Equities at Credit Suisse, we heard that his peers, used to having approximately 5% in Global GEMs, are now inclining towards 30% in GEMs. If one grasps the significance of this change, one would put these on the shopping list soon! In conclusion, don't be like me. Please consult with your accountants or your NFB advisor to take advantage, where appropriate, of the amnesty offered with regard to primary residences. I wrote about this it seems yesterday, but the truth is it was months ago. It expires only at the end of 2011, but believe me, that is just around the corner. Whilst on the subject of time, it would be remiss of me not to mention that NFB turns 25 on the 1st April this year, an achievement we are all very proud of considering the volatile markets we have had to endure over the past few years. Congratulations to the staff who have served NFB so well, to our Institutional friends, the Board of Directors and, most importantly, our clients. Mike Estment, CFP® - Chief Executive Officer
“Retirement Annuities – You can have your cake and eat it!” see inside
IN THIS ISSUE From The Ceo’s Desk Retirement Annuities Please Sir, I want some more Medical Schemes and Open Enrolment
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