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Simon’s weekly wrap: Cash, luxury goods and interest rates

This week MoneywebNOW looked at cash vs equity returns; LVMH’s results; US and SA inflation expectations; Purple Group’s growth; tax and working from home; consumer spending trends and more.
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The old saying ‘cash is king’ may be the case in some circumstances, especially when looking at a company’s profits, but is it true for investing? Chris Rule of CoreShares shared some research he did comparing cash returns vs equity returns and cash did indeed do better at times. The problem is cash did better only around 15% of the time and when it did, it only just beat equities. The answer is then that in investing, cash is not king.

Also on Thursday, I spoke to Mia Kruger, director at Kruger International, about the luxury goods market. I expected it to be especially hard hit due to the pandemic, and initially it did suffer as people couldn’t visit the stores. But as Kruger points out, people moved online and luxury products group LVMH’s results show significant organic growth in the sector. She also touched on EOH as a potential investment case in the local tech space.

US core inflation came in at 1.6% this week, with general inflation at 2.6%. I spoke with Wikus Furstenberg, head of interest rate process at Futuregrowth, on inflation and he stressed the point that the higher inflation is mostly a base effect and more importantly we should, as the US Federal Reserve does, focus on core inflation. Using that metric and the base effect he says local interest rate increases are not likely this year, with the US potentially another two years away from seeing rate increases.

EasyEquities has seen huge growth in active client numbers, and this has flowed into profits as parent Purple Group saw a solid swing into profits for the six months ending February. I spoke with Purple Group CEO Charles Savage on this growth and how being profitable changes the business as it gears up for the next growth leg.

Also this week:

Martin Smith from Anchor Capital on Capitec results; Elani van der Westhuizen from TaxTim on the tax implications of working from home; and Phoevos Pouroulis of Tharisa on the company’s production update as rains hamper production.

Viv Govender of Rand Swiss on Coinbase listing and rand strength; Dave Nemeth, founder of Trend Forward, on rethinking the role of the mall; and Chris Labuschagne, CEO of FNB Card, unpacks consumer spending trends during lockdown.

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