Look

Over the long term, the South African Rand loses value against the US Dollar at an average rate of about -5.8% per year. This decline aligns with the difference in inflation rates between South Africa and the United States and is relatively predictable.

 

 

However, in the short term, the Rand's value can swing up and down sharply. Global economic changes, political events in South Africa, and shifts in commodity prices influence these fluctuations. However, these ups and downs even out over time, making the long-term trend easier to predict.

For long-term investors, these short-term swings aren't too concerning. Because they typically hold a mix of global investments across different types of assets, they can balance out the impact of currency changes. This diversification helps them stay focused on the bigger picture rather than getting distracted by temporary disruptions in currency value.

 

Listen

Yuval Noah Harari, the historian and author of Sapiens: A Brief History of Humankind, has written a new book, Nexus: A Brief History of Information Networks from the Stone Age to AI.  He jokingly says he tries to answer one key question: “If we are so smart, why are we so stupid?”. 

Harari argues that humanity is on a path of self-destruction – whether from the threat of nuclear war or the rise of powerful technologies like AI.  According to him, the problem doesn’t lie in human nature but in the quality of our information.  If you give good people bad information, bad decisions are made.

So why hasn’t the quality of our information improved over thousands of years?  In this interview with journalist Andrew Ross Sorkin, Harari explores this question and many other topics, including the complexities around Israel and Palestine. 

This is an important conversation that I found both interesting and disconcerting. I often wonder about AI's influence and how it can either empower societies or lead to mass misinformation. I’m not entirely sure how we will navigate this in the future.

 

Learn

NinetyOne shares some wonderful research on living annuities.  They highlight important things to consider when setting your annual drawdown and choosing how the underlying funds should be invested.   

Here are my top 5 takeaways:

  • A 5% drawdown (or less) can support inflation-adjusted income for over 30 years.
  • Higher income needs higher equity exposure.
  • Inflation remains the most significant risk a retiree faces.
  • Offshore equity exposure should be between 25% and 55% - be careful not to over-allocate to offshore equities, as it can increase the risk.
  • Fund manager “alpha” (returns above market average) can make a significant difference.   Selecting quality, consistent fund managers can be the difference between your funds lasting your lifetime and funds running out early.

 

Watch the full presentation here.  

 

 

To me, this presentation highlights how complex retirement planning has become.  Not only are we living much longer, but we also have to navigate many factors that can completely derail retirement plans, such as:

  • Early retirements/retrenchments
  • Divorce
  • Death of a spouse
  • Children taking longer to become financially independent
  • Children emigrating
  • Severe illness. 

Good financial advice is, therefore, crucial. Good portfolio construction, sustainable drawdowns, and a level of flexibility are key to navigating uncertainty. At Foundation, we have regular cashflow and scenario planning discussions with our clients to ensure they’re on track with their goals and to make any needed adjustments.

 

Ponder

In this section, I invite you to think about a question I may pose or a thought I may share.

In a world overwhelmed by information and artificial intelligence, what does it mean to seek clarity, and how do we discern what truly matters?

 

Oenophilia

“Oenophilia simply refers to enjoying wine, often by laymen.”

Summer is in full swing, and Joburg is bursting with colour as the Jacaranda starts to lose its flowers. This month, I’m sharing an easy-drinking summer staple: Vrede en Lust Jess Rosé. Named after the owner’s eldest daughter, Jessica-Lee, on her 16th birthday, it’s become one of their biggest-selling wines. This fun, light-bodied wine bursts with summer flavours, perfect for a poolside braai with watermelon and fresh salads.

 

 

I hope you enjoyed this month’s edition.  

Stay curious,

Elke Zeki