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0;border-bottom: 0;padding-top: 27px;padding-bottom: 54px;"> <!--[if (gte mso 9)|(IE)]> <table align="center" border="0" cellspacing="0" cellpadding="0" width="600" style="width:600px;"> <tr> <td align="center" valign="top" width="600" style="width:600px;"> <![endif]--> <table align="center" border="0" cellpadding="0" cellspacing="0" width="100%" class="templateContainer" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;max-width: 600px !important;"> <tr> <td valign="top" class="bodyContainer" style="background:#transparent none no-repeat center/cover;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;background-color: #transparent;background-image: none;background-repeat: no-repeat;background-position: center;background-size: cover;border-top: 0;border-bottom: 0;padding-top: 0;padding-bottom: 0;"><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnTextBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody class="mcnTextBlockOuter"> <tr> <td valign="top" class="mcnTextBlockInner" style="padding-top: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <!--[if mso]> <table align="left" border="0" cellspacing="0" cellpadding="0" width="100%" style="width:100%;"> <tr> <![endif]--> <!--[if mso]> <td valign="top" width="600" style="width:600px;"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="max-width: 100%;min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" width="100%" class="mcnTextContentContainer"> <tbody><tr> <td valign="top" class="mcnTextContent" style="padding-top: 0;padding-right: 18px;padding-bottom: 9px;padding-left: 18px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;word-break: break-word;color: #5b5b5b;font-family: Helvetica;font-size: 14px;line-height: 150%;text-align: left;"> <div style="text-align: center;">EDITION &nbsp;26&nbsp; &nbsp; | &nbsp; &nbsp;NOVEMBER 2020</div> </td> </tr> </tbody></table> <!--[if mso]> </td> <![endif]--> <!--[if mso]> </tr> </table> <![endif]--> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnDividerBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;table-layout: fixed !important;"> <tbody class="mcnDividerBlockOuter"> <tr> <td class="mcnDividerBlockInner" style="min-width: 100%;padding: 18px 18px 32px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table class="mcnDividerContent" border="0" cellpadding="0" cellspacing="0" width="100%" style="min-width: 100%;border-top: 1px solid #8B8B8B;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <span></span> </td> </tr> </tbody></table> <!-- <td class="mcnDividerBlockInner" style="padding: 18px;"> <hr class="mcnDividerContent" style="border-bottom-color:none; border-left-color:none; border-right-color:none; border-bottom-width:0; border-left-width:0; border-right-width:0; margin-top:0; margin-right:0; margin-bottom:0; margin-left:0;" /> --> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnImageBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody class="mcnImageBlockOuter"> <tr> <td valign="top" style="padding: 0px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" class="mcnImageBlockInner"> <table align="left" width="100%" border="0" cellpadding="0" cellspacing="0" class="mcnImageContentContainer" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td class="mcnImageContent" valign="top" style="padding-right: 0px;padding-left: 0px;padding-top: 0;padding-bottom: 0;text-align: center;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <img align="center" alt="" src="https://mcusercontent.com/cdd951e6a7a08b835a0f38a3f/images/f344aa8c-99f2-489e-ab74-29443fb94e3f.jpg" width="600" style="max-width: 1200px;padding-bottom: 0;display: inline !important;vertical-align: bottom;border: 0;height: auto;outline: none;text-decoration: none;-ms-interpolation-mode: bicubic;" class="mcnImage"> </td> </tr> </tbody></table> </td> </tr> </tbody> </table><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnTextBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody class="mcnTextBlockOuter"> <tr> <td valign="top" class="mcnTextBlockInner" style="padding-top: 9px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <!--[if mso]> <table align="left" border="0" cellspacing="0" cellpadding="0" width="100%" style="width:100%;"> <tr> <![endif]--> <!--[if mso]> <td valign="top" width="600" style="width:600px;"> <![endif]--> <table align="left" border="0" cellpadding="0" cellspacing="0" style="max-width: 100%;min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;" width="100%" class="mcnTextContentContainer"> <tbody><tr> <td valign="top" class="mcnTextContent" style="padding-top: 0;padding-right: 18px;padding-bottom: 9px;padding-left: 18px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;word-break: break-word;color: #5b5b5b;font-family: Helvetica;font-size: 14px;line-height: 150%;text-align: left;"> <h4 class="null" style="display: block;margin: 0;padding: 0;color: #949494;font-family: Georgia;font-size: 20px;font-style: italic;font-weight: normal;line-height: 125%;letter-spacing: normal;text-align: left;">In this newsletter we revisit the topic of capitalism and geopolitics which we have covered before. &nbsp;We think that it is worth revisiting because of the turmoil and fear created by the global Covid-19 pandemic.</h4> <br> Geopolitics is the study of how a country’s geographic location, economy, population demographics and its relative size affects both political behavior and foreign policy. &nbsp;Geopolitical events impact on currency flows, trade volumes, fiscal and monetary policy and investor sentiment.<br> &nbsp;<br> In his book <em>The Age of Capitalism</em>, former Fed. Chair Alan Greenspan explains that the world economic system is based on capitalism, which is a powerful force in the regeneration of the economy notwithstanding the influence of geopolitics.<br> &nbsp;<br> We discuss below some of the key geo-political events over the past 80 years and how capitalism continued as a powerful force using the US stock market index and the Dow Jones Industrial Average (DJIA), to measure the advance of capitalism. &nbsp;Each decade had material events that created fear and uncertainty.<br> &nbsp;<br> In the 1940s there were at least 8 major events starting with the fall of France. The attack on Pearl Harbor was the catalyst for the USA’s involvement in World War 2, which heralded price controls and shortages of consumer goods.&nbsp; After the war came the great recession, the Cold War and the rise of Soviet aggression.&nbsp; Yet, in 1946 the DJIA hit 200 points, which commentators regarded as “too high”.<br> &nbsp;<br> The 1950’s started with the Korean War. &nbsp;In the USA high levels of taxation ensued along with industrial unrest which led to State seizure of steel mills. &nbsp;Russia emerged both as a nuclear power and the first country to launch an unmanned spacecraft, the Suez Canal crisis, further recession in the USA and the seizure of power by Fidel Castro. When in 1954 the Dow Jones index hit 300, this was generally considered to be excessive.<br> &nbsp;<br> The 1960’s was equally turbulent. &nbsp;The Berlin Wall was erected. &nbsp;Tensions escalated between the USA and the Soviet Union following the shooting down of a CIA spy plane. &nbsp;Then came the Cuban Missile crisis. First President Kennedy and then Martin Luther King were assassinated.&nbsp; The USA encountered unprecedented levels of racial tension and civil disobedience. &nbsp;In 1969 the Dow Jones index fell 22% from 952 to 744, but by the end of the decade had recovered to 839. &nbsp;&nbsp;In context, this was a respectable performance.<br> &nbsp;<br> If we jump to the 1980’s, interest rates hit record highs and the USA experienced its worst recession in 40 years.&nbsp; Record federal deficits were followed by slowing economic growth, the junk bond scandal and the legendary crash of 1987, when the Dow Jones fell 28% from 2567 to 1866. &nbsp;Yet by the end of the decade the index had more than recovered its losses to close at 2634.<br> &nbsp;<br> More recently we had the Tech Bubble in 1999 and the Global Financial Crisis (GFC) in 2008. The GFC was brought on by excessive risk taking by banks which led to the bursting of the property bubble created by easy money. This led to an economic crisis the size of which hadn’t been seen since the Great Depression of the 1930s. Banks went bankrupt, large businesses were rendered insolvent and there were heavy job losses. &nbsp;It produced the worst fall in stock markets since the 1930s. The DJIA lost 49% of its value between October 2007 and February 2008. &nbsp;The DJIA recovered by March 2013 and went on to exceed 28&nbsp;000 by December 2019.<br> &nbsp;<br> Currently we have been dealing with the Covid-19 virus and the US elections. Efforts to contain the Covid-19 virus literally shut down the world for a few months and the outcome of the US election has the potential to determine the future plans for many businesses. &nbsp;These are material geopolitical issues.<br> &nbsp;<br> How did capitalism do? &nbsp;The DJIA dropped from 29&nbsp;219 points on 20 February 2020 to 18&nbsp;591 on 23 March, a 36% drop in value. &nbsp;The markets recovered because there are businesses that were able to trade and benefit during this time. Vaccines for Covid19 have been developed which gave further impetus to the markets and the DJIA broke through the 30&nbsp;000 points mark on the 24<sup>th</sup> of November 2020 for the first time closing at 30&nbsp;046.<br> &nbsp;&nbsp;<br> From the brief journey through time, it is clear that capitalism has survived in spite of all the very real geo-political issues. The world requires goods and services during good and bad times.<br> &nbsp;<br> If our attention is focused on ensuring that we invest in companies that are appropriately positioned the geo-political news that is reported becomes background noise. The selling of goods and services will continue regardless of geopolitics.&nbsp; We just need to make sure that you have the right ones.<br> &nbsp;<br> The challenge then is how to identify and capitalise on the opportunities. We prefer to use a dedicated research process and team to identify fund managers who have demonstrated competence and skill in different parts of the market. &nbsp;The geopolitics issue is handled at the fund manager level with the support of economists and strategists to assess the impact of current developments on the sustainability of corporate earnings. They have the ability to filter out the noise and the hype and identify the red flags as they arise.<br> &nbsp;<br> Portfolios are then constructed using the different skill sets to create well-diversified portfolios that are positioned appropriately for the prevailing geopolitical and economic climate. Things can change quickly and therefore there is flexibility to be agile when required. &nbsp;The ongoing monitoring allows for continuous assessment and gives direction to changes if required.<br> &nbsp;<br> Capitalism is our world system and it is incredibly powerful. It will stand us in good stead as long as capital is applied with appropriate planning.&nbsp; The timeframes of the investments are key to this planning.<br> &nbsp; </td> </tr> </tbody></table> <!--[if mso]> </td> <![endif]--> <!--[if mso]> </tr> </table> <![endif]--> </td> </tr> </tbody> </table></td> </tr> </table> <!--[if (gte mso 9)|(IE)]> </td> </tr> </table> <![endif]--> </td> </tr> <tr> <td align="center" valign="top" id="templateFooter" data-template-container="" style="background:#333333 none no-repeat center/cover;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;background-color: #333333;background-image: none;background-repeat: no-repeat;background-position: center;background-size: cover;border-top: 0;border-bottom: 0;padding-top: 45px;padding-bottom: 63px;"> <!--[if (gte mso 9)|(IE)]> <table align="center" border="0" cellspacing="0" cellpadding="0" width="600" style="width:600px;"> <tr> <td align="center" valign="top" width="600" style="width:600px;"> <![endif]--> <table align="center" border="0" cellpadding="0" cellspacing="0" width="100%" class="templateContainer" style="border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;max-width: 600px !important;"> <tr> <td valign="top" class="footerContainer" style="background:#transparent none no-repeat center/cover;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;background-color: #transparent;background-image: none;background-repeat: no-repeat;background-position: center;background-size: cover;border-top: 0;border-bottom: 0;padding-top: 0;padding-bottom: 0;"><table border="0" cellpadding="0" cellspacing="0" width="100%" class="mcnDividerBlock" style="min-width: 100%;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;table-layout: fixed !important;"> <tbody class="mcnDividerBlockOuter"> <tr> <td class="mcnDividerBlockInner" style="min-width: 100%;padding: 18px 18px 32px;mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <table class="mcnDividerContent" border="0" cellpadding="0" cellspacing="0" width="100%" style="min-width: 100%;border-top: 1px solid #8B8B8B;border-collapse: collapse;mso-table-lspace: 0pt;mso-table-rspace: 0pt;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <tbody><tr> <td style="mso-line-height-rule: exactly;-ms-text-size-adjust: 100%;-webkit-text-size-adjust: 100%;"> <span></span> </td> </tr> </tbody></table> <!-- <td class="mcnDividerBlockInner" style="padding: 18px;"> <hr class="mcnDividerContent" style="border-bottom-color:none; 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