Peter Brooke  

Good day. My name is Peter Brooke, and I'm a Portfolio Manager at Macro Solutions, part of the Old Mutual Investment Group. This is Macro Perspective seven of 2021. 

And I want to talk about the roaring 20s. On Wednesday last week, I was cycling with a friend of mine who works in the wine industry. Despite the fact that South Africa is drowning in a sea of surplus wine, he's very bullish about next year. And this is due to pent up demand for normality. A lot of commentators have talked about this, and a return to more hedonistic times, similar to the roaring 20s a 100 years ago after the Spanish flu. I tend to agree and think 2022 is going to be a very strong year. 

Quite a while back, during the peak of the HIV epidemic, I read a book called "In the Year of the Plague" about the Black Death. What this showed was there's very clear evidence of excess consumption afterwards, mainly driven by inheritance. Another interesting book that backs up this view was about Hitler and the Battle of Britain. Hitler thought that by bombing London, the ordinary citizens would give up their will to resist, destroying morale. So, he directed his bombers to attack London instead of strategic factories. He was actually 100% wrong. What actually happened was the survivors were so happy to have avoided death, there was a devil-may-care attitude. 

With that historic perspective, we do have some good news coming through on COVID. Obviously, vaccines are rolling out in the rest of the world. And many countries are dropping off quickly. And that's true of us as we pass the second wave. A small additional positive is that there's been a study of blood donors in South Africa. Now, it's obviously a small sample of less than 5,000 people. But what it showed was through the prevalence of antibodies that they estimate a much higher prevalence of COVID-19 in the population. And in fact, they believe that more than 50% of the people in the Eastern Cape and KwaZulu Natal have actually had COVID. 

If this is true, it means we're closer to herd immunity. So, you put together this better news, and I think that there's huge pent up demand for holidays and social activity. We were doing some analysis recently on Thailand, as we've been successfully underweight that market in our global equity product. In February this year, they had 650, sorry, 6,550 foreign tourists. To put that in perspective, they normally have 3-4 million a month, you can bet your bottom dollar that there's only upside from here. The market knows this, and partially explains why shares like Richemont are doing so well. And Bidcorp just doesn't fall despite weak demand in key markets like the UK. 

But there are lots of other ways to invest on this recovery and hunt out opportunities. For instance, our holdings in Nampak, having hurt us terribly last year, are up 163% in the last three months. What is clear is for those companies that service, the more services end hotels, leisure etc. it's been a devastating time. But those that have survived can look forward to a much better 12 months from here. 

I hope you enjoyed this perspective. Until next week.