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It's My Money with Lloyd Uren · Strictly Business

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  You're listening to Strictly Business Podcast with Lindsay Williams.
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  This edition of It's My Money is brought to you by Brenthurst Wealth, your partner
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  for global wealth creation.
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  Welcome to It's My Money.
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  It's My Money is brought to you by Brenthurst Wealth, South Africa's
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  multi-award winning boutique wealth manager.
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  This week I'm speaking to Lloyd Uren from Brenthurst Wealth.
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  And he sent me something that says the following, and it made me sort of sit back
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  a bit because it says how to rejig your
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  finances.
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  for a world war and i thought to myself well i've been taught in the past not to
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  rejig my finances when anything like this happens
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  because it all passes by so lloyd is now going to explain why he seems to be flying
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  in the face of conventional wisdom lloyd
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  you say it's hard to ignore what's happening in the middle east but that's
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  what we've been taught to do forget about these things block out the
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  noise not this time according to you well thanks for having me again lindsey it's
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  Always a pleasure.
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  Thank you.
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  I think I've maybe used the incorrect word by saying rejig.
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  Okay.
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  But it's more a way of thinking about going through a sort of a time of
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  uncertainty that we're going through
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  at the moment.
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  Obviously, not to make the rejigging doesn't refer to making sweeping changes,
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  more to making tiny adjustments based on the current conditions.
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  Again, we have a saying in Afrikaans, which is to hold tight and hunker down a
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  bit.
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  And obviously to...
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  just manage the expectations that come with increasing fuel prices and food
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  prices and all of the the
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  extra sort of economic conditions that come with that i'm not one of those people
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  that wants to ignore these sort of things by the
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  way just to nail my colors to the master lloyd because you have to understand what
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  is going on in the macro
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  environment behind the scenes and south africa as you quite rightly say feels it
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  twice because You know,
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  we've been going so well with commodity prices high, the good commodity prices for
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  South Africa, i.e.
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  gold and coal and iron ore and platinum group metals and all that sort of thing.
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  But now we've got it the other way.
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  Those commodities having a bit of a wobble, oil going in the wrong direction,
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  the RAN therefore going in the wrong direction as well.
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  And of course, South Africa imports its fuel.
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  So, I mean, it's a double whammy almost.
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  Yeah, absolutely.
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  Double whammy is probably the perfect way to describe it.
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  And also almost a complete reversion of what we saw last year,
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  where the RAND strengthened a lot and we saw gold run very well and very hard,
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  is now kind of turning around a bit and the US dollar is coming back into favor.
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  So, yeah, it is quite a tricky time, especially for South Africa.
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  And obviously with the commodity prices coming down, it affects South Africa's
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  revenues.
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  So...
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  But yeah, essentially the fuel price or the cost of oil going up,
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  the US dollar strengthening against the RAND, the RAND weakening,
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  means we're kind of paying extra for the fuel and we have less value to pay for
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  that fuel.
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  So at the end of the day, unfortunately, at the end of the day,
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  it's passed on to the consumer and we feel it at the pumps and we feel it at the
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  shops.
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  So it is quite a difficult time for everyday citizens.
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  And also the everyday citizen has problems, but the Reserve Bank has
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  probably even more problems.
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  The Reserve Bank has a difficult choice.
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  I think as we speak, Lloyd, the CPI inflation rate, consumer price inflation,
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  is hovering around that 3% area.
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  That is before the war hit, and it's not going to stay there.
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  It's probably going to go closer to 4% should the oil price stay around about $90
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  to $100 a barrel.
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  And the round continues on its...
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  hopefully short-term downward trajectory.
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  So the Reserve Bank has to say, what do we do here?
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  Do we stop cutting rates because we want inflation to stay in check?
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  Do we just wait for two or three months?
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  It's a juggling act that I wouldn't want to do.
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  No, absolutely.
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  And it's not a job I would want either.
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  I think as of this morning, I saw that for now, the interest rates are going to be
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  held by the Reserve Bank.
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  So it does mean that we're going to, I think, think we'll hit closer to our limit
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  on inflation, which is around the
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  4-5%, which we don't really want to go over.
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  I think the upper limit is 6% that the Reserve Bank tries to maintain not going
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  above.
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  But yeah, I think by that logic or notion,
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  I would assume that they're kind of waiting for things to pass.
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  It's quite possible that the Middle East crisis is maybe settling somewhat.
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  I think the US and Iran are coming slowly back to the table.
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  So hopefully it becomes more of a waiting game that we kind of just have to eat the
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  extra costs
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  for a month or two and things can revert back to its prior more normalized levels.
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  But obviously we don't know what could happen.
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  Obviously, Donald Trump's the ultimate wild card to the world economy.
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  So we just have to, yeah, I think they're playing a bit of a waiting game.
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  I think a lot of the world's reserve banks are playing a waiting game to see what
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  happens next.
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  So, yeah, again,
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  it's similar to sort of a regular person's strategy at the moment,
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  which is to just hold tight and see how things progress and make decisions as we
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  go.
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  You were very kind when you said Donald Trump is a wild card because he's much
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  more than that, of course.
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  and When you say he's a wild card, it's out of your control.
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  It's out of all of our control.
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  But there are certain things that you can control.
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  How can we, in the short term, without rejigging too much, and as you said in
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  your introduction,
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  the rejig was maybe the wrong word,
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  but we can be aware of what is going on and make little tweaks here and there.
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  So how do we do it?
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  How, when we've got these oil prices high and it's costing us 20% more to fill up
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  our car,
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  if we're lucky enough to have a car, What do we do, Lloyd?
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  You're the man to tell us.
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  You're the personal finance man.
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  Well, firstly, then I'll speak to sort of your discretionary spending.
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  Obviously, we know that most households'
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  primary costs come in the form of fuel for cars, get us to and from work and wherever
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  we need to go,
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  and as well as food prices.
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  Obviously, the fuel price is inherently a factor in both of those things.
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  And so those are the two expenses that we can expect to go up and will go up.
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  So it means we have to be very aware of our budgets and we may have to reduce
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  spending in other areas
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  of interest.
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  We might have to have a little bit less enjoyment over the next month or two so
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  that we can continue to cover those costs of
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  fuel and food that we need that are important for it.
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  Those ultimately drive to continue the economy functioning.
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  And we all have to kind of play our part in that regard.
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  So from a discretionary spending point of view,
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  we kind of have to be aware of our budgets and reduce things where we reduce
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  non-necessary expenses where we can.
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  From an investment point of view,
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  we often see big rebounds in the stock markets after these sorts of crisis.
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  Obviously, it's not very nice at the moment looking at any chart and everything
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  just seems to be going down.
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  But again, The important part is to not lock in your losses by disinvesting,
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  by panicking and moving out of your positions because, A,
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  that's going to guarantee that you are losing money and losing wealth in your
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  portfolio.
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  But also it doesn't allow you the opportunity to re-earn that value and
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  beyond when the
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  markets invariably start going on a bull run as they typically do after this sort
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  of crisis.
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  One thing I like about these world wars, and if there is anything to like, it's
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  this.
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  It makes you sit back and say, OK, what's wrong with my portfolio?
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  Is it buffered enough for these sort of events?
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  And I've spoken to you and I've spoken to your colleagues over the years,
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  and the emergency fund has always been something that should be part of anyone's
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  portfolio.
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  In other words, something that's there for the unexpected.
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  This is unexpected.
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  So if you do want to keep up your spending patterns, you can dip into that emergency
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  fund.
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  That's the sort of thing that I quite like about these events because they give you a
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  bit of a shake, don't they?
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  They do.
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  And again, emergency funds are probably,
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  I think it's the first thing that anyone in the financial advisory space will tell
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  you to get in order
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  before you start investing money or any of that sort of thing.
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  So getting your budget in order, getting your emergency fund in order, it prevents
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  you from having to take on extra debt.
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  such as credit card debt or short-term loans, which, again,
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  as part of the rejigging of your finances,
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  this would not be the time to be sort of taking out new debt or new loans or any
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  extra
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  lines of credit.
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  I'd rather dip into your emergency savings.
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  That's what they're there for.
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  And when things normalize, you can always top that up again to where it needs to be.
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  But it is, as you say, it's a very good test of your… Financial resilience, these
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  sort of events,
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  as uncomfortable as they are, I think it drives our emotions more than our
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  rationality.
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  And obviously, the panic mode tells us, take everything out, be as safe as
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  possible.
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  But I think there's an old adage that when things are uncertain and you don't know
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  what to do, do nothing.
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  I love doing nothing.
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  You say in your sort of summary paragraph, you say right at the end, you say, in
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  times of global conflict,
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  the most valuable quality isn't speed or boldness.
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  It's resilience and resilience starts with preparation.
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  So maybe sum up what we said over the last few minutes.
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  if you would, and I think start with don't panic, don't listen to too many podcasts,
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  don't watch too much television,
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  don't listen to too many radio shows and get all caught up in it.
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  Is that step one, blot it out a little bit?
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  To an extent, I'd say block out the noise and always look one layer deeper to what
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  the news is
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  telling you.
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  Obviously, I think with any sort of shock, news will sensationalise.
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  what is going on but if we kind of look a little bit deeper we realize what does
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  what they say means okay there's a crisis in the middle east
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  what this means is oil prices are probably going to go up that means extra cost on
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  fuel extra cost on food
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  what do we need to do that will make sure we don't either have to take out more more
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  loans or lives
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  of credit what what will keep our long term financial health as healthy as
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  possible.
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  would be, I'd say, first step in these sorts of times.
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  Lloyd, thanks so much for your wisdom.
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  Lloyd Uren is a financial advisor at Brenthurst Wealth in Granger Bay in Cape
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  Town, and that was It's My Money.
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  It's My Money was brought to you by Brenthurst Wealth, an award-winning
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  boutique wealth management company.