The Fat Wallet Show with Kristia van Heerden

Podcast: The end of the world

In Latest, The Fat Wallet by Kristia van Heerden

We’re not prone to panic, but at this point staying calm requires a level of stoicism we haven’t quite mastered. You may have forgotten this in the diseased fog of the Coronavirus, but a mere two months ago it seemed as though the US was going to war with Iran. 

Part of what makes it so hard to keep calm is that the rest of the world is in a flat panic. When even the Federal Reserve starts behaving erratically, you may be forgiven for wanting to turn your ETFs into Kruger Rands*. 

In this week’s episode, Simon and I discuss some of the fallouts we’re seeing in world markets and in our portfolios. We try to understand some of the more alarming news headlines, explain why the US rate cut is by no means a good sign and talk through some of what we can expect as local investors. 

If you take one thing from this episode, I hope it’s this: wash your hands!

*Don’t do that.


Beeped show is below.


Win of the week: Ursula 

Transferring my Liberty RA to Sygnia, I stumbled across the ‘Sygnia Life Berkshire Hathaway Fund’ on their website. What are your thoughts on this product? It is touted as a ‘linked Life Endowment Policy’ that invests 100% in BRK shares. While not being targeted at ‘major offshore players who are already set up to trade independently and can easily buy BRK’s Class A or B shares. Rather, the SLBF has been designed to offer a hassle-free option to invest offshore with Buffett without the complexity’. I phoned Sygnia in the hopes of getting some more information with regards to the TIC etc. but was informed that because the fund is so new, this information is not yet available. 

I am at the point where I would like to start investing in addition to the funds currently directed my TFSA and my RA and was curious about this. Why would one opt for an investment like this as opposed to directly investing in Berkshire Hathaway and what benefits, if any, does a Life Endowment have?


Barry

I was sent a video that basically states that the US is bankrupt and has two options.

  1. The US government stops influencing the market and allows the business model to play out, the effect of which they compared to a 1930’s type depression. Take the pain in one big hit.
  2. The US government allows massive inflation, bypasses the banking system (which provides loans), and provides an MMT style (I had to google that) of providing “helicopter” money to consumers and maintaining debt demand, resulting in rising inflation or hyperinflation as more money chases limited goods and services.

 It certainly seems logical that this could happen from a layman’s perspective. If you spend more than you earn for long enough, you end up in a world of trouble.

Is this just some more scaremongering or possibly some realism in there?

Secondly, if either of the above scenarios were to play out and one was invested in a ‘buy-for-life’ Total World ETF like the Vanguard VWRD or even the Ashburton 1200 or MSCI World, what would the effect of either of these scenarios playing out be on the ETF?

Currently the US market cap is weighted at about 55% of the ETF, if the this scenario were to play out and the US market-cap dropped as they rebalanced, would the ETF over a period of time rebalance accordingly too, chuck out the US holdings and increase those from other geographical regions as the non-US regions capitalized on the market-cap that the US had lost? So, a (relatively, a few years) short-term drop-in ETF unit price followed by a gradual recovery again? Similar to how Steinhoff is/ has been worked out of the Top 40 by the ETF?

What would the effect be on the value of the USD?


Javid

I have recently come across your gem of a podcast and have been trawling through as many of your previous podcasts as possible.

My question is:

  • With tensions amongst the US and Iran at an all time high it seems imminent that it may escalate into another protracted war that could even turn nuclear. With this in mind what preparations should South African investors embark on to protect/rebalance our financial assets in the interim as this plays out. Some of my thoughts:

– If you’re holding onto ZAR cash should this be rather converted to USD or Gold which could be seen as a safe haven (bearing in mind the US could enter hyperinflation as they print more USD to fund another war).

– I suspect Oil in the region would surge, holding an oil index in the interim?

– Are there any stocks to consider – perhaps in the defence industry?

– I guess one could also have a list of fundamentally sound stocks on a watchlist and purchase them when they are a deep discount?


The Fat Wallet Show with Kristia van HeerdenThe Fat Wallet Show is a no-nonsense personal finance and investment podcast hosted by Kristia van Heerden and Simon Brown. Every week we answer questions by a growing audience of finance enthusiasts. Submit your pressing money and investment questions to ask@justonelap.com.

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