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Looking ahead

17 December 2004 Angelo Coppola

I thought it would be an opportune time to reflect on the year past and to have an early crack at some wishes for 2005, says Shaun le Roux at Alphen Asset Management.

Wanting to avoid the President's poison pen in his Friday letters I will be forced to tilt the review towards the positive but thankfully that is not difficult, after all 2004 must rank as one of South Africa's best years ever.

This year we celebrated ten years of democracy, and an extraordinarily peaceful democracy at that. That's worth a glass or two of the Cape's finest bubbly.

On the economic side, anybody that pays tax, owns property and/or shares and owes the bank a lot of money, has seen their net worth and residual monthly income increase substantially.

The increase in net worth has been even more sizeable in dollar terms. The relative strength of the currency has been extremely supportive of imports and the resulting plummeting of prices, of durables in particular, has seen a scrum in the shopping malls.

Lower interest rates have made it much easier to service debt, which has increased demand.

Growth in demand for mortgages has been supported by higher house prices. So, a significant part of our population has felt richer and spent accordingly.

This consumer exuberance is reflected in some of the highest confidence readings ever, and has encouraged expansion and growth by SA companies.

Unfortunately, this economic boom has been less appreciated by those living close to or below the poverty line as even though basic food and transport prices have come down or been kept in check, jobs remain difficult to come by.

The growth in our investment cycle does bode well for job creation so let's hold thumbs.

GDP has grown in each of the past 11 years, which is unprecedented in recent history, and the past quarter has seen an acceleration of growth rates to meaningful levels.

Inflation is at its lowest level in 40 years, and we haven't seen interest rates this low since the early 1980's. The prices of the commodities we export are booming.

Government is embarking on a massive infrastructure spending programme and have started to take a pro-growth slant.

All this paints a very positive picture and if I could wave my wand and throw in a little bit of currency weakness we would be witnessing a rocket ready for take-off.

And now here are my top ten wishes for 2005:

1. A slightly weaker rand. It may make that skiing holiday a bit more expensive for some, but I worry about the long-term effects of closing down much of our export and production capacity.

2. Regime change in Zimbabwe. We are really not helping our own cause as well as our Zimbabwean brothers by standing idly by while the country implodes.

3. No more US invasions of perceived hotbeds of terrorism - wishful thinking I know.

4. Another good year on the markets. We think it's on the cards even if it is unlikely to come close to 2004.

5. I finally get to the bottom of the dynamics of the golf swing and the 45 degree shank becomes 250 metres straight down the fairway.

6. Rand strength and a supply glut sees wine prices going back to the levels they were at when the currency was last at these levels. While we're atit, how about car prices doing the same?

7. We finally deliver on our potential as a tourist destination. A weaker currency would help, but for a start let's sort out those airport landing slotsand high hotel prices.

8. A resurgence of all our sports teams without the help of administrators, politicians or Australian referees and umpires finally understanding the rules of thegame.

9. Lower real interest rates. Hopefully this would result from lower nominal rates and not higher inflation.

10. A product punt.

Quick Polls

QUESTION

Each year ordinary consumers and their financial and wealth advisers flock to dozens of asset manager ‘outlook’ presentations to find out about economic and investment trends, and the next ‘hot’ company. What do you want asset managers to share during these events?

ANSWER

Asset allocation strategies
Big picture investment themes and how to position portfolios for them
Investment methodologies and historic fund yields
Share tips by the score
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