Fiscal Cliffs
We certainly do have an interesting December 2012 ahead of us. The World is waiting with baited breath to know whether the USA will be able to secure a bi-partisan agreement by the end of the month for their budgetary and tax issues for 2013 and beyond. The outcome is by no means certain as the parties dig-in to protect their turf on matters of principle. Yet, sanity will no doubt prevail and an awkward compromise will be struck.
Back home in RSA we have an entirely different turf war which has little to do with principles and everything to do with positions and power. We doubt very much that the USA party battles will become physical … but fairly sure we will endure some rough stuff in Mangaung [a.k.a Bloemfontein]. David Bruce, in an article in the Mail and Guardian last month, estimated that 50 politically linked people have been killed in KwaZulu-Natal alone since the beginning of 2011. The Mangaung outcome is pretty certain – our President will get his second term, his retirement home and in due course a full pension and heavily subsidised retirement!
© 2012 Zapiro (All Rights Reserved) Cartoon Printed with permission from http://www.zapiro.com
Enough said … ‘tis a time to be MERRY …
There is much to be merry about in the past 12 months or so. On the sporting front our Olympians really did us proud in both Olympics staged in London this year; our cricket team retains the number one slot in the world ranking; our rugby team ranks at number 2 behind arch rivals New Zealand; our golfers continue to feature well with Louis Oosthuizen currently ranked 5th in the World and many more I’m sure.
On the local business front we have had many successes. Perhaps a little known “first” for the country [indeed for Africa] was the appointment of Mr Kosie Louw, the chief legal and policy officer of SARS, as Chairperson of the Global Forum on Transparency and Exchange of Information for Tax Purposes. No surprise really – after all SARS has increased Revenue Collection from R100billion in 1994 to R743billion for the last tax year! Our stock market [the All Share Index] has returned 19,8% over the past 12 months which was certainly above expectations a year ago. Interestingly it is in line with the 50 year average rate of return of the RSA Stock Market between 1960 and 2010 according to a survey done by Stanlib.
The market news from abroad has also been really good over the past 12 months. The returns shown in the graph on the left are all in US$ and range from 8,13% for the Dow Jones Industrial Index through to 11,05% for the Morgan Stanley Capital Index [MSCI] Worldwide. That green line shows just how volatile Europe has been – and demonstrates how well that market has recovered in the run up to end November 2012. Local Fund Managers are clearly seeking better value in offshore equity markets as most have maximised the amount they are allowed to invest abroad.
On the right we see those same markets – but this time valued in ZAR. It is pleasing to note that such solid ZAR returns [18,59% to 21,79%] can be had in first world countries without taking the high risk of only being invested in a single emerging market. Of course that’s why so many local fund managers have tended to push their offshore investment limits to the maximum. The best news is that, whether you have been invested on-shore or off-shore [or best of all in both] you will have enjoyed meaningful growth well above inflation. Those who remained predominantly in cash will find that they have gone backwards with current inflation rates being above the returns available on cash.
House news …
Congratulations to our Stacey who has passed her final exams and completed her Diploma in Financial Planning. Our best wishes to all our clients and their respective families for the Festive Season and the New Year.
Kind regards
John Wallace – November 2012.