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Catalysts Hurt

Gerhard le Roux

October 2020

They shake you from your foundations. A break from your narratives and denials into the NOW. An encounter with reality and truth.

I do not doubt that we will remember 2020 as the year of the catalyst. The global forces of climate change, fracturing social discourse, and the COVID pandemic are imposing themselves onto our lives in a way that no human can ignore. The pandemic has given rise to a worldwide spike in unemployment and ballooning debt, but it’s not all bad; it’s forced the work-from-home revolution, as well as a meaningful increase in personal hygiene awareness, everywhere except America. We are forever changed.

I have spent a lot of time thinking about catalysts, particularly the enormous amount of pent up energy that lie dormant in office buildings around the world waiting for a spark, something, anything. (Looking back at my career, it feels like a comment from my subconscious.) The ability of a person, product or event to ignite the energy and passion in humans, as if by magic, is terrific.

2020 thus far have not surprised with a revolutionary new product unless you count Zoom or the Sony PS5 to catalyse our collective imagination. Still, for all listening, it should have given a wake-up call. There is real value in preparation and the ability to respond to opportunities when they present.

All this change is painful and very real. I don’t want to make light of the impact of the change on our lives but highlight the call to actions this moment in time represents. Recessions and strife seem to be the catalyst for ingenuity and creation. It could be the jolt you need to save that little extra or open that offshore account. Use that energy while it’s still burning.

News and Markets

A heavy dose of reality check was administered to the markets in September as the global equity euphoria came to a jarring halt. Stimulus checks in the US have dried up while significant spikes in COVID in the western world as autumn sets in have spooked markets. Considering the run from March, we could still see markets choppy into the November US election or until the next stimulus check is approved.

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The real economy in the US is still under considerable pressure, and I still fear that markets have overshot the mark in the near term. Below is an interesting chart from the Visual Capitalist showing the impact of COVID and the lockdown on US small businesses. Full article here.

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Actions to take

Stay the course. It’s one month to go until the US election, and you can expect a wild ride in the markets. As global market stimulus has been the main driver of market performance, it is difficult to decide whether the Republicans or Democrats will be the most aggressive printing press operators. My guess is that the markets would prefer a Trump second term. It will be hell to try and price all that into the market as vote counting, and the subsequent result will ace significant delays due to the substantial increase in mail-in voting. More on that in this Last Week Tonight piece.

Locally, bullish talk starting on South African equity due to the attractive valuations of local companies. Foreigners have continued to sell SA Inc on all fronts. Foreign bond holding has now dropped to 9-year lows, last seen before our inclusion in the World Bond Index. A potential cause for optimism, but we remain cautious in the near term.

ZAR Watch

The ZAR is looking strong flirting with 16.50 regularly. If you have money to move abroad, you should take advantage of Rand strength when the currency goes on a tear.

The Bookshelf

I’ve read The Laws of Human Nature by Robert Greene.

The Laws of Human Nature provides some first-rate comprehensive and in-depth information about how to deal with our fellow human beings effectively. Greene’s intense curiosity about the inner workings of humanity is contagious, as he invites us to join him as fellow sleuths on his investigation of why people, including ourselves, do what we do. He rightly (and frequently)reminds us that in order to understand others, we must first and foremost understand what makes ourselves tick. Boy, I enjoy his work and find the rich historical references a treat.

Chat soon. Gerhard.

This information is not advice as defined in the FAIS Act, 37 of 2002, as amended. Trades or securities mentioned herein may not be suitable for all investors. The use of leverage increases risk, and your losses can exceed your capital. Past returns are not indicative of future performance.

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