CHRIS HART Economic Megatrends Setting the business and investment horizons.
-
Upload
kory-harvey -
Category
Documents
-
view
214 -
download
0
Transcript of CHRIS HART Economic Megatrends Setting the business and investment horizons.
CHRIS HART
Economic Megatrends
Setting the business and investment horizons
2
Economyand
markets
Inflation Demographics
CommoditiesTechnology
Emerging &developedmarkets
Investment implications: longer term
ClimateChange
CRB Commodity index: record commodity prices following 20-year bear trend
Source: INet
Commodities: inflation adjusted suggests there is scope for more!
Source: INet
Commodities: long term bull market.Super-trend, around which there will be cycles
Supply
Infrastructure
Demand
Expansion and maintenance:Global backlog across both emerging and developed markets
Structural rise in demand from emerging market growth
Depletion factor
6
Demographics
Ageprofile
Dependencyratios
Longevity
Global demographics will be driving policy and economies
Education andskills
Energy prices: records and uptrend to be sustained. New technology a very long term limiting factor
Source: INet
Economist Food Index: a global problem. Fuel prices raising production costs
Source: INet
9
Technology
Commodityprices
Foodshortages
Climatechange
Utility andadvancement
Geo-politicaltension
Technological gains: a key change driverForgotten post the tech bubble
PlatinumUranium
SubstitutesExplorationExtraction
Climate changeBio fuelsGM, hybrids
10
USSuperpower
Geo politics: economic power shift from the developed world to emerging markets
A decade ago
Now
US debtornation
Internal criticalmass
Growth dynamics
Demographics
No rivals both militarily and economicallyUS catches cold…
11
Globalinflation
Commodityprices
Emergingmarket
affluence
EMdemographics
Regulation;protectionism
Central banks
Inflation: a multiplicity of “challenges”
EU bond yields: trend change due to inflation.No longer benign due to commodities
Source: INet
South Africa: the short term
BoP
InterestRates
TradeBalance
GDP
Demand
PPI
$/R
CPI
The Business
Cycle
Inflation: relentless rise since mid-2006Food, fuel, rand weakness
Source: INet
Food inflation: another surgeSolution??
Source: INet
Transport: highest inflation level since 1993!
Source: INet
Furniture: inflation? What inflation?
Source: INet
Maize: at high levels and staying there
Source: INet
Chicago maize
Source: INet
Wheat: tripled in two yearsGive us our daily bread will cripple the taxpayer!
Source: INet
Economics: lesson 1Suppress price and create a shortage
Source: INet
Price
Quantity
Equilibrium point
Demand
Supply
Other key economic issues
GDP growth: cycles evident and roughly two years in duration
Vicious cycle could become more violent due to extreme current account gap
26
Current a/c-6% GDP
The current account: does not matter until it does!
9 months ago
May 2008
Current a/c-8% GDP
ESKOMSlowing growth
Politics
Only!
Interest rates: heading for recession in consumer sectors
Source: INet
Vehicle sales: in recession already
Source: INet
Property: house prices not keeping up with inflation for the first time in 9 years!
Source: INet
Inflation: Above inflation target for at least the next 1 to 2 years
Source: INet
Interest rates: could we reach 2002 levelsTito Mboweni is in a really bad mood!
Source: INet
Rand not helping
Source: INet
Rand: crash vs euro (but not a crisis!!)
Source: INet
Defeating inflation:if the hammer was the cause of the headache, more hammer is not the cure
Supply - demand
Fiscal reforms
Cost - push
Spend on infrastructure, lower cost of doing business, penalize consumption, reward saving
Costs can be absorbed with higher productivity and competition
Interest rates are bringing down demand but not inflation!!
… and if you think we have a problem:
Source: INet
Keeping perspective
CyclicalityCycles are a natural part of any economy
Current position
Two years hence
In a down cycle at present and there is further downside. 2008 will be rough!
Resumption of up-cycle with greater strength due to lessons learned in this cycle
Thank you
Serves merely as a display of promotional material relating to such financial product
Is a factual and objective description of such the financial product Does not constitute an express or implied recommendation, guidance
or proposal that any particular transaction in respect such financial product is appropriate to your particular investment objectives, financial situation or particular needs
Is not advice as contemplated in the Financial Advisory and Intermediary Services Act
Investment Solutions Limited shall not be liable for any damage or loss suffered resulting from any action taken by any person based on this presentation or any discussions relating thereto.
FAIS-compliance statement FAIS licence number 711
Investment Solutions Limited is a licenced financial services provider in terms of Section 8 of the Financial Advisory and Intermediary Services Act, 37 of 2002, as amended. Any information in this presentation relating to any financial product: