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Hi All

I never made it to the States in the end. We applied too late for our visas. Clearly 6 weeks wasn’t enough time for the Yanks to grant us access. Anyway, everything happens for a reason and we’ll plan something else.

In the meantime we had a local election which went largely as expected with lower voter turnouts, the ANC and DA losing ground mostly for the same reasons (infighting and lack of convincing plans) and the left/right wing gaining ground on populism.

That leaves Ramaphosa to wheedle his way through constructing a government that satisfies VERY many stakeholders. We all know what happens when you try and please everyone…..Anyway let’s give him the benefit of the doubt until we see what he dreams up.

World markets have been choppy for the same reasons as have been around for some time already. Among them are trade wars, Brexit and slowing growth. None of these seem to be going away anytime soon, in fact they may all be intensifying so expect more volatility. 

The USA has looked and felt to me for some time very similar to 2001. Their economy had enjoyed unfettered growth since 1982, the longest consecutive period on record. The stock exchange was at record levels due to the longest bull market in history, tech darlings abounded and everything looked great. That is until the dot bombs started exploding and the whole thing began to unravel, resulting in huge drawdowns and an S+P 500 which took 10 years of being absolutely flat to recover.

One sincerely hopes we haven’t arrived at a similar place now, although some of the signs are clearly there. Naturally, despite many similarities, there are major differences as well. The world is far more intertwined now, the effect of globalization which was still a relatively unknown concept 20 years ago. 

Now we have a situation where, for example, Huawei get accused of “cheating” (let’s leave it at that) and effectively banned from doing business in the USA. Google, currently by far the world’s biggest and most influential content distributor, ban Huawei from using their services and, as a direct consequence, the Google share price tanks along with US chipmakers Qualcomm and Intel who are large suppliers to Huawei, currently the world’s largest phone company. 

With the world’s content distribution fast being concentrated onto phones, this possibly leaves those US tech giants in an invidious position, because I would not be surprised to see the Chinese “ringfence” and companies like Huawei start using local chipmakers exclusively and promoting local search engines like JD.com as distributors, thereby accelerating their already-impressive growth. 

None of this is as simple as perhaps I make it sound, but all these things are certainly now on the radar screen. Our favourite managers have been looking with growing interest at Chinese and other far eastern Emerging Market (EM) companies which are starting to display signs of maturing into investable alternatives, some even bordering on world class firms. At least, even if Trump gets the states into a cold war with China, we will be able to invest in the best of both and, hopefully, make some money.  

More next time

Kind regards,

Ricky Williams
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