NFB FINANCIAL UPDATE Issue 73 April 2014
FROM THE CEO’s DESK
F
rom the get-go I wondered just how effective the Public Protector's report on Nkandla would be. It seems that she has delivered on her mandate and it is now up to the ANC, the State and the body politic to decide on the correct course of action. Most of us are simply disappointed, disgusted or just plain dejected by the scale and audacity of these actions. For as long as I can remember, certain politicians have been guilty of actions unbecoming of their station, and certainly not in the mandate afforded them by their constituencies. However, like the murder trial running concurrently, it is more about the consequences than anything else. Never mind the spin doctors, the bully boy tactics, or who can afford the most expensive counsel, this one can be decided by the casting of hard fought democratic votes in a few weeks time. The politicians will be watching the mood of the public very carefully and, I
®
Mike Estment CFP professional BA / CEO - NFB Financial Services Group
financial services group
trust, behaving accordingly. If this happens, Clem Sunter's High Road outcome remains a possibility. If it doesn't, the Afro-skeptics, who I have repeatedly ridiculed, will start becoming self-righteous and their predictions of us being on a slippery slope will prevail. This is a very important time for South Africa. It is further coloured by some rather interesting political developments, which give me hope. Firstly the ANC pushed three contentious and Labour (read COSATU) unfriendly issues through parliament. These are the E-toll system, the Youth Wage Subsidy and the NDP (National Development Plan). This is rather reminiscent, says Political Analyst and erstwhile ANC stalwart, Nic Borain, of Maggie Thatcher taking on the unions in the UK. The ANC have compromised the comfortable tripartite alliance and have also fired the young looneys, who have rallied around Julius and created a right wing thorn in the ANC's side, in the form of the EFF. Whilst not a serious threat, Borain says they might get serious support from a reasonably substantial part of the younger vote, disenfranchised by the ANC and highly irritated by Nkandla, Gupta-gate and favours for pals. He reckons COPE and Agang are marginal, but together with a fair improvement for the DA (notably in Gauteng) and the EFF, the ANC majority could slip to a tad over 60% - nowhere near the outright majority needed to unilaterally start amending the Constitution. There is hope, but the world is watching. On to markets, investments and other slightly less confusing realities: I would note that one certainty is nothing stays the same for too long. Recent feedback shows previously underperforming funds doing superbly. These include John Biccard's Value Fund, which is right back up there over short-term measurement periods. The currency bet taken by most managers we support has paid off over the last year, as is born out in the recent performance of some of our “global” industrials, which have stormed ahead and are leading the JSE higher. It is important to remember that
even the mighty fall and rational thought and action is needed to protect profits, or simply value. NFB and similar serious wealth management businesses keep beating the drum of appropriate diversification. Now is as important a time as ever to recognize this approach, and more importantly, act on this advice to ensure portfolios remain appropriately exposed to assets that fairly price in the current reality and market risk. One of the key leading indicators of equities is interest rates. The world is going to have to get used to a less accommodative approach from Central Banks, and, accordingly, economies will have to once again stand-alone and resume the ebb-and-flow typical in these markets. Risk will return to markets and investors won't be in for a free ride as has been the global reality for the last few years. In South Africa, we have seen one small increase in rates of 0,5%. Economists have predicted a few more of these during coming months, but technical research says the likelihood of a steep increase is lessening. The South African economy is challenged by a great number of material issues. These include a vast under- or un-employed labour force, poor standards of education, crazily restrictive labour laws, crime and other socio-economic maladies. However, these are more than matched currently by a never-say-die attitude, a world class financial infrastructure, including amongst the world's best rated exchange, banking and assurance sectors and certain parts of an otherwise lackluster public service. The standouts here are SARS, Treasury, the Department of Finance and a few others. It's a pity that the leadership don't have the political will to use these as the trend setters. Mediocrity is NOT an option for our budding democracy. We need change and not for change's sake. Please engage with your Wealth Managers at NFB for more insight into some of the technical observations in this editorial.
fortune favours the well advised