The Money Train

Enjoy it while it lasts

Keen for a fun fact? Taking inflation into account, the United States Federal Reserve (The FED) has spent more money in the form of economic stimulus to recover from the global COVID-19 pandemic than it had spent on both world wars combined!

As the rate of the global vaccine rollout is rapidly increasing, especially in developed countries, we are starting to see how many parts of the world are returning to pre-pandemic normalcy. Economic activity increases as consumers are in a spending environment after being stuck at home for months. All of this spending, along with the wide-spread monetary stimulus that has been pumped into the developed economies, is leading to prices becoming more expensive as the demand for goods and services are increasing.

Consumer cash balances are still at record high levels across most developed nations, the FED will increase this cash balance for consumers in the US with a fourth round of stimulus cheques to the value of $1400 (R20,300) per individual who meet the necessary requirements. Most of the stimulus cheques provided will end up in some form of good or service as the economy re-opens and that will lead to prices, inevitably increasing due to the increased demand by consumers.

So, what is the problem?

Developed nation’s governments are providing inflated lifestyles and living standards to their consumers, with the historic stimulus programs that they have in place, at the cost of so many other nations and individuals across the world.

Not only should we worry about when the stimulus train stops (central banks will have to pull back on their accommodative monetary policies at some stage, inevitably) we should also be worried about the world-wide scrutiny on the raw materials that are used for energy generation, such as oil and coal. Fair enough, it is time for change and better safe-keeping of our natural resources. However, the harsh stance that is being taken to reduce the usage of fossil fuels by enterprises will increase production costs across the board for all products and services.

The countries who will suffer the most from this historic monetary stimulus are developing nations, such as South Africa. The domestic currencies of these affected nations will become much more difficult to maintain at sustainable levels for them to achieve the required economic growth to improve key socio-economic aspects such as unemployment and poverty.

Who are we?

Caveat Capital Management is a strategic advisory firm based in Cape Town. Caveat Capital Management specializes in structuring tailor-made investment portfolios that serve your needs now and grow with you as your needs change. Caveat works to maximize your gains and minimize the risk.

What we offer

Caveat Capital Management has a competitive fee structure that incentivizes the portfolio manager to perform and the renumeration is highly linked to the performance of the portfolio. Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA). Meaning that we have the required licensing to structure full-discretionary portfolios structured to your needs.

Disclaimer

This report does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Information and content

The information in and content of this publication are provided by Caveat Capital Management as general information about the company and its products and services. Caveat Capital Management does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Caveat Capital Management has taken and will continue to take care that all information provided, in so far as this is under its control, is true and correct. However, Caveat Capital Management shall not be responsible for and therefore disclaims any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon any information provided. Past performance is not an indication of future performance. Caveat Capital Management does not provide any guarantee regarding capital or performance.

Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA).