Old Mutual Investment Group

Macro Perspectives 1 | Investment lessons from the holidays

January 16, 2023 Old Mutual Investment Group
Old Mutual Investment Group
Macro Perspectives 1 | Investment lessons from the holidays
Show Notes Transcript Chapter Markers

Portfolio Manager, Peter Brooke, shares his latest perspectives, using investment lessons from the holidays to analyse the current local and global macro-economic and market environments.

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Peter Brooke  00:00

Good day. I'm Peter Brooke, a Portfolio Manager at the Old Mutual Investment Group. This is the very first Macro Perspective of 2023. So, happy New Year, and good luck for the year ahead. I'm absolutely convinced it will be better than 2022, where global equity and global bond markets were down by 18 and 17% respectively. This made for the worst performance in 100 years from a 60/40 passive global balanced portfolio. Because I've only been back in the office for two days, we're going to talk a bit about the investment lessons from my holiday. 

Peter Brooke  00:32

The first point is that South Africa is cheap. Well, put it differently, skiing in Europe is eye wateringly expensive. I'm so glad we stayed in an apartment, eating South African Pronutro for breakfast and snacking on South African biltong on the slopes. This does highlight the huge opportunity for tourism, and I was delighted to see the foreign passport queue was much longer than the South African one when we got back. 

Peter Brooke  00:57

However, the second lesson is our infrastructure sucks. While our airports are still great following the Soccer World Cup, experiencing German roads, trains, and buses highlights how badly we are under-investing. This is obvious when we look at the tourist numbers domestically. Cape Town has had a good season. But Sathyen was saying his holiday in Umhlanga was eerily quiet. KwaZulu Natal beach numbers were less than 500,000 compared to one and a half million pre-Covid, showing the impact of the under-investment in infrastructure, resulting in sewerage spills, resulting in an unattractive product. Tana went to Hazyview in Mpumalanga and said you couldn't get around without a 4x4 because the roads were so bad. 

Peter Brooke  01:46

The third lesson is you have to google "Snow Sure". And we were lucky to have picked a higher resort as many places didn't have snow. Now, you might be wondering what the investment relevance of this is. But it's... Europe has had a warm winter and gas prices are down 50%. This has been great news for our investment in Eurozone banks, made just after the Russian invasion. Across Europe, gas consumption is down 20% compared to the previous periods and will be one of the enduring impacts of the Russian invasion. Europe is starting to wean itself off cheap gas, much like the water crisis in Cape Town forced a fundamental change in how we consume water here. This is a long-term positive for Europe, and a massive negative for Russia. 

Peter Brooke  02:32

The fourth lesson was a reminder about Covid. Ischgl, where we stayed, was ground zero of Europe's Covid explosion. And it was like nothing had happened. The lifts were packed, the bars were crammed, everyone was there. And this really makes me bullish about China's reopening, and we are overweight Chinese equity. The final point was just a reminder of how enduring British American Tobacco's business models. I'm continually surprised by how many young people are still smoking. I hope you enjoyed this perspective. Until next week. #alwaysthinkinginvestment. 

Peter shares the first investment lesson from his holiday: South Africa is cheap
The second lesson: South African infrastructure is terrible
The third lesson: Google “Snow Sure” – Europe is weaning itself off cheap gas
The fourth lesson: a reminder about Covid.