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The Government clearly capitalised on the perception of voters that, in spite of the excesses and prevailing dissatisfaction, the Government should be returned to power because it succeeded in creating a strong Rand and economy. This is exactly what happened when Bill Clinton was elected for a second term as president of America by a huge margin.
During the past months, several people came to me with the question on what the Rand, relative to International Currencies, will do. Because the phenomenon is contrary to the fundamentals as I read them, I tried to excuse myself as not being an expert. Every time the person who posed the question pointed out that I made some predictions on the Rand, Dollar, and Euro several years ago and these predictions became true exactly!
Yes, I did expect the freefall of the Rand in 2001. And the fall of the US Dollar was overdue. I did expect the Euro to strengthen, not only in US Dollar terms, but also in Swiss Franc terms. These things did happen. However, I did not expect the British Pound to remain so strong.
When I thought about the reasons I expected these currencies to move, I realised that I observe fundamentals without even concentrating. This was not always the case. Although I travelled a lot and used many International Currencies, I did not really understand what made currencies move relative to each other. In 1995 I bought a course called International Currencies Made EZ. This course turned my head and since then I could evaluate fundamentals regarding an International Currency without even trying.
Real money can only be created by adding value. By doing productive work. By offering exceptional service. So, when you observe sullen service levels that borders on contempt for the customer most of the time, you can be sure that the currency of that country is in trouble. And it is then time to get out of that currency. There are often overruns that keep a currency going, or lag time that delays the strengthening of a currency, but in the longer term the general rule prevails. Underneath the complexity and apparent randomness of currency fluctuations, there is order and logic.
In an article I invited readers to do the following exercise:
Connect to the Internet and click here.
Step 1, choose Southern Africa under Predefined Currency Basket. It will list Southern African countries with some of them selected. Deselect all except South Africa. Choose your Base Currency as CHF i.e. the currency code for Swiss Francs.
Step 2, click on “Graph Relative Change”. Use the 10 year graph and use your full screen. Click “Previous”. Unfortunately they only have data since 1990. But look at the trend. Believe me, the trend for the previous 20 years was more or less the same. Click “Next”. Ouch! Looks like the trend for the next 10 years could even be worse. Play it also for United States Dollars (USD) against CHF. My computer did not want to print it out. But the message should be clear. Get out of South African Rand (ZAR) and USD and keep your cash in CHF.
The strong Rand in the current 10 year cycle is totally out of character. Therefore I advise any South African Entrepreneur to move the maximum amount that the law allows you to a Swiss bank account. Don’t even worry about how to invest it. You can just let it rest there earning almost no interest. When the Rand returns to the level where it should be, you will make a healthy profit in Rand terms.
You need to understand International Currencies. Why they move and what makes them weak or strong. It is imperative to your financial well being that you see the bigger global currency picture. A falling base currency can ruin your wealth.
I think I paid $149 for the course International Currencies Made EZ back in 1995. The good news is that Gary A. Scott, the presenter of this course, has now made it available to you for FREE. A lot of things changed since 1995, but understanding fundamentals remains the same. The course gives you a history of monetary systems with a detailed discussion on the history of money, the creation of money, inflation, bonds, and the money market.
Do yourself a favour. Make time and work through this course. Connect to the Internet and click here.
Kind regards.
Philip de Bruin