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Broad Overview of 2017 – The Road Ahead 2018

by | Insights, Uncategorized

Giovanni Lorenzi

The past 12 – 36 months taught us very little that was new. It did however crystalize and reinforce certain concepts that we all know but often choose to forget. They include the following:

  • That we know what we know

  • That often, we do not know (recognize might be equally appropriate) what we do not know

  • That things happen slowly, slowly then suddenly,

  • That most events happen in cycles, and

  • That cycles, especially economic cycles, are not nor could or should they ever be, forever positive, nor

  • That these cycles be forever negative!

Bad things and good things have a finite life expectancy. They are transient and come to an end. Problem is that when we are in a bad cycle we extrapolate, assume and indeed discount that the bad cycle will continue indefinitely.

Conversely, when we enjoy a good cycle we extrapolate on the assumption that the good cycle will continue forever.

If we apply these simplistic observations to the South African economy especially during the past 12 – 36 months:

  • it became evident that many, if not most of our citizens firmly believed there was a wholesale plunder of state resources in progress.

  • It became evident that it was only a matter of time before this exploded with the intensity of a nuclear weapon of mass (wealth) destruction.

  • few believed that this could and would soon “come to an end” based on the logic that the ANC was impervious to the mood permeating our country. Remember the “infamous quote” The ANC will rule until “God comes again?” and

  • When things were going “right” for RSA Inc. few expected such a sudden and dramatic end to a good cycle and the entrenchment of a bad cycle aided and abetted by extremely poor and less than honest economic and political considerations.

  • Slowly, slowly then suddenly started to become evident but a couple of months ago.

Throughout the good times and the not so good times, Wealth Preservation Strategies have maintained a positive attitude based on the concept of the “economic imperative.”

The economic imperative demands that, for all to prosper the cake must get bigger. The economy must grow and that when it reaches the point of no longer being able to grow because of the decisions of dishonest, ill- informed, ill-advised incompetents and thieves, then it is at that point that we dare to hope.

I believe that we are at that point and the next couple of months should reveal much.

It is not that we are out of the woods but, as with any problem, the first step in rectifying the problem is acknowledgement that one indeed has a problem.

I firmly believe that the tipping point was reached hence the decisions we have seen by the Deputy President, Mr. Cyril Ramaphosa and his motley National Executive Committee, crew.

2017 was a difficult year made worse for many by what is described by ABSA Bank in their papers against members of the Steinhoff elite as “naked fraud”

The market reacted aggressively and punitively on the news of the Steinhoff debacle and this was immediately perceived by many to be, “the beginning of the end”

There was some consolation for those who suffered from the he dramatic collapse of the Steinhoff price in the rand and its, ever unpredictable strengthening by almost 10% in QTR 4 of 2017.

All of the above conspired the FTSE /JSE All Share Index to deliver a mouthwatering 21% return for 2017 despite all the negativity. But…as with all things, the devil is in the detail.

Naspers, Richemont and BHP Billiton accounted for more than half the return with Naspers alone accounting for 40% of the FTSE /JSE All Share return.

The point is that the returns were not broad-based across all the sectors and counters on the JSE. They were narrowly focused in a handful of shares and that requires that investors remain ever vigilant.

That said, there are indications that RSA Inc. is turning the corner and that augurs well for the future provided that the powers that be take bold, positive economic and political steps to engender and broaden the levels of confidence and hope for our people and in our country.

They dare not fail.