Weekly Thoughts 7 September 2018

A thought came to me while listening to the news a couple of weeks back and then while watching the economic indicators moving all over the place.  It involves issue around the exchange rate, after the Rand weakened again

We all want the Rand to strengthen to see the price of petrol and other imported goods come down.  For people importing goods for their business, they want it to strengthen so that their product is easier to buy in Rands.  But sometimes we would want it to weaken.

Exporters might.  Folk living in South Africa earning a British pension would want it to weaken, so that they get more Rands this side.  We might also want it to weaken so that our offshore investments that are priced in Rands (appear to) have grown in value.  I made some quick calculations this morning.  I took one client’s offshore unit trust investment and measure that they had a 12.3% capital growth in just the last two months.  Sounds good.  But it’s a false growth.  The underlying international assets have not actually gone up that much if measured in Dollars or Pounds.  If we were wanting to liquidate an investment like this, then we can benefit from this false growth.  But if it’s part of our long term investing, then what do we do with that ‘growth’?  Nothing.

It feels like many of us seem to want the Rand to go both ways, all the time, for different reasons.  Luckily we can do nothing to control this.  So better not to lose sleep over it.  Just a thought…