A New World Order · Global Economic Growth (Index based to 100 March 2008) UK ... Source: Thomson...
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A New World Order Maarten Ackerman Chief Economist and Advisory Partner Citadel Investment Services 0835033293
Transcript of A New World Order · Global Economic Growth (Index based to 100 March 2008) UK ... Source: Thomson...
A New World Order
Maarten Ackerman
Chief Economist and Advisory Partner
Citadel Investment Services
0835033293
10 Years after the global financial crisis
What has worked?
Long and mixed economic recovery
Source: Thomson Reuters DataStream
Global Economic Growth
(Index based to 100 March 2008)
UK
Japan
Germany
US
Source: Thomson Reuters DataStream
EU
Italy
50
100
150
200
250
300
350
400
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101 106 111
Started: 1974Real wealth created: 8% per annumDuration: 6.3 years
Started: 1982Real wealth created: 25% per annumDuration: 5.3 years
Started: 1994Real wealth created: 25% per annumDuration: 5.8 years
Started: 2002Real wealth created: 11% per annumDuration: 5.3 years
Started: 2009Real wealth created: 15% per annumDuration: 9.5 years
Bull and bear markets: S&P500
Source: Thomson Reuters DataStream, CAM
Months since start of bull market
S&P 500(Index)
50
100
150
200
250
300
350
400
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101 106 111
???
Bull and bear markets: S&P500
Source: Thomson Reuters DataStream, CAM
Months since start of bull market
S&P 500(Index)
Started: 1974
Started: 1982Started: 1994
Started: 2002
Started: 2009
Markets decoupled from fundamentals in 2018
10 Years after the global financial crisis
What didn't work?
Growing inequalityThe rise of populism
TRADE WARS – PICKING ON CHINA
TRADE WARS
Cheap money ending up in the wrong hands
Source: Thomson Reuters DataStream, CAM
Argentina External Debt
(USD, Billions)
Source: Thomson Reuters DataStream
Themes/Risks/Opportunities for 2019
Source: Thomson Reuters DataStream, CAM
1. Hawkish FED vs Dovish FED (USD?)
2. Chinese trade deal or not
3. Chinese fiscal/monetary stimulation
4. SA pre/post election – 2019 the story of two halves
2019 will be better than 2018 only if the above tilt
towards the positive outcome/scenario
South Africa2019 – Pre and Post election story
Economic Growth
(Year on Year percentage change)
Global real economic growth
SA real economic growth
A new dawn from a low base?
Source: World Bank, SARB, CAM
-2
-1
0
1
2
3
4
5
6
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
BUT WAIT, STRONG TEAM AT THE TOP
2018 A busy year for CR
75
80
85
90
95
100
105
110
75
80
85
90
95
100
105
110
115
Oct-94 Oct-97 Oct-00 Oct-03 Oct-06 Oct-09 Oct-12 Oct-15
Manufacturing
(Index)
< SA manufacturing production
Global coincident indicator>
Recession since 2011 already
Source:StatsSA, SARB, CAM
Oct-18
75
80
85
90
95
100
105
110
75
80
85
90
95
100
105
110
115
120
125
Oct-94 Oct-97 Oct-00 Oct-03 Oct-06 Oct-09 Oct-12 Oct-15
Mining
(Index)
< SA mining production
Global coincident indicator>
Recession since 2011 already
Source:StatsSA, SARB, CAM
Oct-18
Lack of foreign direct investment
Source: Bloomberg, World Bank
90
95
100
105
110
115
120
125
130
135
Mar-08 Mar-10 Mar-12 Mar-14 Mar-16 Mar-18
Employment
(Index)
Private sector
Public sector
Limited job creating in private sector
Source: SARB, CAM
Total employment
Inflation and Wage Increases
(Year – on – Year % change)
Public sector wage increases
Inflation
Bloated wage increases
Source:StatsSA, SARB, CAMSource: Thomson Reuters DataStream
Will you buy this business?
Revenue up 343%Assets up 394%
Staff up 46%
Sales down 2%
Profit down 81%
Debt up 1000%
The white elephant
ESKOM
(Financial Metrics)
Source: Eskom
Salient metrics: ten years 2007 2017 Change (%)
Total sales (GWh) 218,120 214,121 -2%
Nominal capacity (MW) 42,618 44,134 4%
Revenue (R'bn) 40 177 343%
Net debt (R'bn) 30 334 1013%
Total assets (R'bn) 144 710 394%
Net finance cost (R'bn) 1.7 14.3 743%
Profit of year (R'bn) 4.6 0.9 -81%
Employees 32,674 47,658 46%
Implications for the rand?
Rand Dollar Exchange Rate18
16
14
12
10
8
6
4
2
Source: Thomson Reuters DataStream
2
15
Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-18
Investment landscape
Your personal economy
Business / CareerBusiness / Career
Wealth Creation
Lifestyle / Passion
Family / Health
Emotional Capital
Lifestyle
Supporting Assets
Wealth Preservation
Next Generation
Excess Wealth
Your personal economy
Business / CareerBusiness / Career
Wealth Creation
Lifestyle / Passion
Family / Health
Emotional Capital
Lifestyle
Supporting Assets
Wealth Preservation
Next Generation
Excess Wealth
Wealth Management
Financial Planning
Fiduciary Services
Offshore Structures
Tax Planning
Risk
Treasury (FX) Solutions
Philanthropy
Your biggest risks: INFLATION
Your biggest risks: TAX
Your biggest risks: LONGEVITY
Where to invest to stay ahead
Views shown reflects thesignals from Citadel AssetManagement's asset valuationmodels and are based oneach asset class's 3-5 yearexpected return.
The model's expected return iscompared to what investorshistorically expected fromthese asset classes. Asexample a Neutral Outlook willbe roughly 1% real return forCash, 3% for Bonds, 5% forProperty and 6% for Equity.
• Approaching final stage of economic cycle
• Should expect real, but lower single digit returns from asset
classes
• Will adjust portfolio pro-actively by increasing shock absorbers
and reducing equity “beta” (reduce market correlation)
• Adhere to disciplined financial plan
Conclusion
Maarten Ackerman
Chief Economist and Advisory Partner
Citadel Investment Services
0835033293
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