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Time to Invest Offshore?

Continued economic instability will result in a volatile outlook for global wealth management.

Mark Appleton

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Investing-Offshore

The outlook for the global economy is more benign in early 2013 than it has been for some time, and for anyone who has previously been nervous to look outside South Africa for investment opportunities the risks offshore are today lower than they have been for some time – and the risk of investing domestically somewhat higher.

The domestic macro environment

In a post-Budget business breakfast hosted by FNB on 1 March, finance minister Gordhan Pravin pointedly mentioned that sub-Saharan Africa’s growth rate would have been 6.2% last year (actual: 5.7%) were it not for the dampening impact of South Africa’s far lower growth rate.

When one researches individual South African companies, one could be surprised to discover just how much of their revenue today comes from the rest of Africa. Possibly then, we should not view our local corporate growth rate prospects as quite so modest.

While our national GDP may be growing at just 2.3%, many of our Top 40 companies are heavily exposed to a market growing at 6.2%.

A leading investment services house for sub-Saharan Africa reports that while its South African business grew 17% last year (in itself quite robust) the rest of its Africa business grew 66% in a single year. The Nigerian stock market grew 47% last year, and has already posted 20% so far this year, while other markets such as Kenya, Zambia and Zimbabwe are not far behind.

It is expected that within five years many South African businesses will find their revenue from African operations overtaking their domestic operations. Typically, margins in Africa are substantially higher than in South Africa.

That paints a heroic picture of Africa compared to the rest of the global economy, and one that is possibly more immediate than most people have suspected. Five years is not a long time.

For our high net worth clients, this points to a clear investment opportunity in offshore markets. Other emerging markets offer higher fundamental growth than South Africa, while developed economies are currently offering better value from an investment perspective.

The global macro environment

Economists uniformly list three issues confronting the world in 2013: the US economy, the Eurozone crisis and slowing growth in China. Each of the three issues broadly existed a year ago, but for all three the detail has changed.

In the US, the consumer market is improving but the economy is running a deficit that is bigger than Greece’s, percentagewise. The US will have to go through a phase of austerity like that of Greece and other European countries.

Although austerity in Greece, Portugal, Spain and Ireland are familiar themes, the Eurozone crisis too has evolved a long way. These countries have all made dramatic advances in reform programmes, and their people endured serious hardship.

There has also been a softening of stance by the European Central Bank, which has advised it will do everything necessary to stimulate growth in Europe. So the right decisions have been successfully implemented, but it will take time and one cannot point to any economic growth in Europe during 2013.

China was the main driver of global growth during the worst of the recession back in 2008, so its impact on this current bout of recession may be the single most important theme of 2013, given the country has only in March finally completed its leadership transition.

No brave decisions could be made in the lead up to the transition, nor the period immediately after. On top of that there is the question of whether or not China is going through a major structural adjustment. The sense is that future growth levels for China will be 7-8% rather than 11-12%. This will have a significant impact on future global economic growth rates. Brazil and India have also demonstrated rapidly cooling economies.

Where’s the money going in 2013?

Capital flows into South Africa either into fixed direct investment (FDI), equities or bonds. Flows into our equities have been quite modest by global standards, a trend that will continue until investors gain greater confidence in the emerging market story. Instead, developed world capital looking for higher yield to service its liabilities has gone into the bond market where South African returns are high compared to the US and Europe.

These flows will continue and for this reason the rand is more likely to remain stable than to weaken during the remainder of 2013. However, as a result bond markets the world over are expensive.

As to the investment case for South Africa, like other emerging economies that have seen sharply lower growth this year, we remain hostage to the global environment, which has seen planet-wide growth slip for each of the past three years: 2010 (5%); 2011 (3.8%); 2012 (3.1%); and 2013 (projected 3.4%).

South Africa has an additional layer of its own challenges, especially around labour issues. The social compact between labour, business and the ANC has forever changed. Successful demands for higher wages inevitably mean fewer jobs.

For South Africa, these issues of modest global growth, anxiety around structural changes and leadership transition may result in inward investment continuing to ebb and flow for the remainder of this year based on shifting risk appetite.

Where should you invest globally?

One point to watch: pundits frequently suggest offshore markets are better value than the domestic one, arguing foreign companies which have a substantial exposure to emerging markets are the bets to pick. While this is not untrue, does the same argument not apply to South African companies with strong exposure to African markets?

Take MTN, it trades in 21 countries and pays 76% of its earnings in dividend, for an after-tax dividend yield higher than you could get on the money market.

Fortunately, most of our clients would already be comfortably exposed to the Top 40 JSE-listed companies, leaving offshore markets as the stand-out investment theme of the moment. Although some offshore markets had a good 2012, we at FNB Private Clients still reckon that offshore equities are the space to be in over the next five to 10 years.

Notwithstanding markets such as the US currently standing at their all-time highs, you are still getting quality companies at a discount to what they have been at over the past 20 years and will handsomely reward the investor over other asset classes – albeit they are more expensive than last year. Remember, that previous high was reached back in 2007 and many companies have continued to record good increases in earnings in the years since.

There are some particularly good pockets of value to be had at the moment, especially for the contrarian investor. Europe, for all its desperate situation, offers value as it has seen most of its companies sold down and it too offers a discount at the moment.

Other emerging markets are demonstrating exceptional value. Some companies on emerging market bourses are trading at 20-15% discounts over developed markets (which themselves are at a discount to their historical levels).

Over the past three years, these markets were sold down faster than developed ones, plus they have the advantage of stronger fundamentals.

In particular, investors should be on the look-out for those companies paying high dividends as these will be the first to run when the search for yield hits equities.

Mark Appleton is a South African Strategist at FNB Private Clients. He has over 30 years investment management experience, having managed the Unilever Pension Fund (R2,5 billion) followed by a 5-year stint as chief investment officer for Marriott Asset Management (R2 billion). Mark has been with FNB Securities as chief investment officer for over 12 years and RMB Private Bank as a South African strategist for three years.

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11 Things You Need To Know About Bitcoin

The cryptocurrency has had a tumultuous existence so far.

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Gold Bitcoin Coin

11 Bits about Bitcoin

Even the most tech savvy among us have a hard time wrapping their heads around Bitcoin. It’s a hot topic and a frequent point of discussion among investors, entrepreneurs and stock traders, so you should want to know all about it.

For starters, here’s an overly simplified explanation of Bitcoin: It’s a digital currency (there are more than 800 now) that isn’t controlled by a central authority such as a government or bank. It’s created by “miners,” who use computers and specialised hardware to process transactions, secure the currency’s network and collect bitcoins in exchange.

Supporters say it allows for more secure transactions over the internet. That’s in part due to blockchain, a technology that records cryptocurrency transactions chronologically in a public digital ledger.

Bitcoin is only eight and a half years old, but it’s the oldest and most highly valued cryptocurrency out there. In such a short time, it’s had a rocky and controversial history, but it’s also attracted a fair share of high-profile supporters.

Related: 6 Rookie Investor Mistakes You Must Avoid For Profitable Investing

Click through to read 11 bits about Bitcoin that will make you at least sound like you know what you’re talking about next time it inevitably comes up.

The birth of Bitcoin

birth-of-bitcoin

Starting point at 2008

The origins of bitcoin trace back to 2008, when its creator, who went by the pseudonym Satoshi Nakamoto, published a proof of concept for Bitcoin.

The proof was then published to a cryptocurrency mailing list in 2009. Nakamoto left the project in 2010 and disappeared, but other developers picked up the work.

Bitcoin’s birthday is Jan. 3, when Nakamoto mined the first 50 units of the currency.

An elusive creator

elusive

No one really knows

The true identity of Bitcoin’s creator has never been confirmed. Newsweek claimed to have found Bitcoin’s creator in 2014, identifying Temple City, Calif, resident Dorian Satoshi Nakamoto. He has vigorously denied it.

In 2015, an Australian entrepreneur named Craig Wright said he was Bitcoin’s creator, but he couldn’t produce the evidence to support his claim.

Whoever Nakamoto is, that person is very rich, as the creator is estimated to have mined a million bitcoins in the currency’s early days.

Very expensive pizza

pizza

We wonder what was on the pizza?

The first transaction involving bitcoin was reported on May 22, 2010, when a programmer identified as Laszlo Hanyecz said he “successfully traded 10,000 bitcoins for pizza.”

As of June 14, 2018, 10,000 bitcoins are worth about $64.8 million.


Fintech: Fusing Finance And Technology

Fintech has become a disruptive force in the financial sector that is threatening the current status quo of banking and finance. The main beneficiary of that is the consumer.


You can spend bitcoins

spend-bitcoins

How to spend your bitcoins

While it may not seem like it, people continue to use bitcoins to buy stuff.

Related: Make The Most Of SA’s Law And Initial Coin Offering

The largest businesses to accept the cryptocurrency include Overstock.comExpediaNewegg and Dish.

Federal Bureau of Bitcoin

Federal Bureau of Bitcoin

The banning of Bitcoins

At one point, the U.S. government was one of the largest holders of bitcoin.

In 2013, after the FBI shut down Silk Road, a darknet site where people could buy drugs and other illicit goods and services, it took over bitcoin wallets controlled by the site, one of which held 144,000 bitcoins.

Investors have been making a killing by bidding on government-seized bitcoins.

A mountain-sized setback

Mt. Gox

Mt. Gox

In early 2014, Bitcoin suffered a devastating loss after the alleged hacking of Mt. Gox, a Japanese exchange.

About $460 million of the currency (in 2014 value) was stolen. It was the largest loss of bitcoins ever and raised concerns about how secure the currency was.

The billionaires’ takes

warren-buffett

Warren Buffett

Warren Buffett, perhaps the most famous investor in the world, was not so keen on Bitcoin one of the only times he addressed the currency.

“Stay away from it. It’s a mirage, basically,” he told CNBC. “The idea that it has some huge intrinsic value is a joke in my view.”

Fellow billionaire investor Jamie Dimon, chief executive of JPMorgan Chase, had even stronger words about Bitcoin:

“You can’t have a business where people are going to invent a currency out of thin air. It won’t end well … someone is going to get killed and then the government is going to come down on it.”

But not all billionaires are against Bitcoin. Mark Cuban has said its value is inflated, but he recently invested in a venture capital fund that backs cryptocurrency. Richard Branson, however, has spoken more optimistically about it.


The Currency Revolution

The rise and rise of digital currencies – and how they’re affecting your business.


Wealthy twins and a smart teen

Cameron and Tyler Winklevoss

Cameron and Tyler Winklevoss

Other notable investors in Bitcoin include Cameron and Tyler Winklevoss (the Harvard-educated twins who sued Mark Zuckerberg claiming that Facebook was based on an idea they’d had).

They invested $11 million into Bitcoin in 2013, an amount said to be about 1 percent of all bitcoins in circulation at that time. The Winklevoss twins have been petitioning the SEC to create a bitcoin exchange traded fund.

The agency rejected the idea earlier this year.

Another is investor and entrepreneur Erik Finman, who invested $1,000 into Bitcoin when he was 14 years old and is now a millionaire.

Celebrities want in

ashton-kutcher-2017

Ashton Kutcher

Celebrities have also expressed enthusiasm for the cryptocurrency.

Actor and Goop founder Gwyneth Paltrow advises Abra, a Bitcoin wallet, and Ashton Kutcher, Nas and Floyd Mayweather have all invested in Bitcoin start-ups.

Support from a big financial institution

Fidelity Investments

Fidelity Investments

In August 2017, Fidelity Investments became a rare standout among financial institutions in embracing Bitcoin and other cryptocurrencies.

The company allows its clients to use the Fidelity website to view their bitcoin holdings held through digital wallet provider Coinbase.

“This is an experiment in the spirit of learning what these crypto assets are like and how our customers may want to interact with them,” Hadley Stern, senior vice president and managing director at Fidelity Labs, told Reuters.

A hard fork

Bitcoin Cash

Bitcoin Cash

On Aug. 1 2017, Bitcoin experienced what’s being called a “hard fork” as a result of a few issues, including the limited number of transactions that can be processed per second. Essentially, the cryptocurrency split into two, with Bitcoin Cash debuting.

Here’s how Rob Marvin of PCMag explains the situation:

“The Bitcoin fork speaks to a fundamental ideological rift over what’s more important: Preserving the decentralised nature and independent control of the Bitcoin network, or accelerating transaction speeds to make the cryptocurrency more viable for mainstream ecommerce and payments.”

Bitcoin Cash allows larger blocks of currency and more transactions per second.

This article was originally posted here on Entrepreneur.com.


Related: 10 Ways To Make Money While You Sleep

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9 Warren Buffett Quotes That Will Teach You More Than Just Investing

While he is one of the most famous investors in the world, his expertise goes beyond money.

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Check out these nine quotes on time, success, mindset and more

There’s more to learn than finance from one of today’s most famous investors, Warren Buffett. In fact, the businessman, financial guru and philanthropist can teach you a thing or two about life. From taking risks to coping with change, Buffett’s expertise that expands far beyond stocks and dollar signs.

From a young age, the billionaire investor was destined for success – selling garbage bags to neighbors and delivering newspapers. By age 15, Buffett was already worth thousands of dollars and investing in real estate.

However, fast forward nearly 70 years and the “Oracle of Omaha” is now worth a whopping $77 billion, according to Forbes, making him currently the second richest person in the world (behind only Bill Gates).

Related: 5 Worthwhile Investment Lessons I Learned From Warren Buffett

There’s much to learn from Buffett too.

On time

warren-buffett

Warren Buffett

“No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.” – Warren Buffett

On risk

Warren Buffett

Warren Buffett on risk management

“I don’t look to jump over seven-foot bars: I look around for one-foot bars that I can step over.” – Warren Buffett

On change

warren-buffett

Be the change you want to see in the world

“The most important thing to do if you find yourself in a hole is to stop digging.” – Warren Buffett

Related: 5 Things Warren Buffett Does After Work

On success

Warren-Buffett

What you need to know about success

“You only have to do a very few things right in your life so long as you don’t do too many things wrong.” – Warren Buffett

On empowerment

Warren-Buffett-billionaire-successful-entrepreneur

Image Credit: Art Streiber

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” – Warren Buffett

On opportunity

Warren-Buffett-problem-solving

When looking for an opportunity…

“You do things when the opportunities come along.” – Warren Buffett

On mindset

Warren-Buffett-billionaire-close-up

Mindset management

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett

On leadership

Warren Buffett

Warren Buffett

“Someone is sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett

On motivation

Warren Buffett

Look for motivation

“Predicting rain doesn’t count. Building arks does.” – Warren Buffett

This article was originally posted here on Entrepreneur.com.

Related: 21 Inspiring Quotes About Success, Persistence And What It Means To Be An Entrepreneur

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Decrypting Cryptocurrencies

Your guide to understanding cryptocurrencies, why they are so popular and how you can use them.

Brenton Naicker

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brenton-naicker-cryptocurrency

Cryptocurrencies, like other forms of currency, provide a means of transacting goods and services. While other forms of exchange, such as fiat currencies (paper money) are issued, circulated and centrally controlled by governments and regulated by banks, cryptocurrencies are electronic and decentralised.

This means that transactions are peer-to-peer, negating the need, or additional expenses, of third party involvement such as banks or governments. The cryptocurrency market penetration will be facilitated by universal Wi-Fi and global mobile phone dispersion, enabling anyone to move money and assets, peer-to-peer, seamlessly and at almost no cost.

This clearly shows that it’s important that businesses and entrepreneurs understand this market in order to plan for the inevitable shift in the way the world transacts finances.

Related: Make The Most Of SA’s Law And Initial Coin Offering

How does a cryptocurrency transaction work?

The infrastructure supporting the cryptocurrency system is called the Blockchain, a digital ledger that stores all transaction information, and addresses three of the most obvious problems of the current money transmittance system:

  • It is decentralised, so transaction data is dispersed and not centrally controlled – this also means that the data is a lot more secure than with more traditional systems because there is not one point of entry for hackers.
  • There is no third-party involvement (ie, banks), which makes transaction fees significantly lower.
  • Transactions are in real-time and not encumbered by trading hours or bureaucracy.

Who controls cryptocurrency?

bitcoin-and-internet-accessLike conventional banking, cryptocurrency has a complex underlying structure issuing currency, recording transactions and allowing people to transact. The main difference is that an algorithm issues the currency and ledgers (not banks or governments), storing the information in blocks. Transactions match up public codes relating to user-held private passwords from their cryptocurrency Wallets.

The transaction amounts are public, but who sent the transaction is encrypted. Whoever owns the password to the Wallet owns the denoted cryptocurrency amount shown on the ledger. Even though transactions are added sequentially, many may be added to the ledger at the same time. These chains of transactions grouped in blocks make up the Blockchain.

Related: 11 Things You Need To Know About Bitcoin

Are Cryptocurrencies Here to Stay?

Cryptocurrencies, and with it the Blockchain, have unlocked value and opportunities for commerce that would’ve been hard to imagine even a few decades ago. Here are 5 reasons why Cryptocurrency is here to stay:

  1. A transaction, once confirmed, cannot be reversed or tampered with. So, they are secure and indelible.
  2. Cryptocurrency is transferred between Blockchain addresses. So, no real-world entities are associated with the accounts.
  3. Transactions are processed instantly and globally. Therefore, there is no delay in transfers.
  4. Cryptocurrency uses cryptographical processes. So, funds are locked and only available to private key owners.
  5. Generally, cryptocurrency does not require permissions from an authority.

Investing in cryptocurrencies

When looking to invest in cryptocurrencies, keep in mind that they are just like other stocks and subject to change in value based on supply and demand. In fact, since cryptocurrencies are not insured, and exposed to market fluctuations, they bear the same risks as stock markets.

Some exciting work has however been done to address these potential fluctuations while also continually optimising cryptocurrency value by companies such as Krypteum, who offer an advanced A.I enabled investment crypto coin.

Read next: 6 Rookie Investor Mistakes You Must Avoid For Profitable Investing

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