The Investor September 2023

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ShareFinder’s prediction for Wall Street for the next 3 months(top) and the JSE (bottom).

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Hidden taxes politicians hope you don’t spot

By Richard Cluver

T o a world population mired in relative poverty, the Top Ten percent of income earners might seem to exist in a fabled heaven which has made them the target of widespread public envy and, in the eyes of socialist politicians, an inadequately tapped potential source of additional tax.

In last month’s issue I hopefully convinced readers why this was not true; why this privileged group was as burdened as the rest of us by the failure of government. Shockingly, however, it does not end there because on top of the tax squeeze, everyone is facing a plethora of hidden taxes which are arguably the real reason why so many folk feel dissatisfied with their treadmill lives. The following graph explains why:

Pictured here is the dramatic increase in global government-spending over the past century, from an average of barely three percent in the 1920s to, in some leading countries to almost 60 percent of GDP in the 21st century. That spending, growing at twice the rate that governments have been able to increase their total tax collection, entirely explains why central banks have felt obliged to allow global money supply to soar far beyond global GDP growth which was in turn the primary cause of monetary inflation….and why ordinary folk were having to deal with decimated household budgets as a result of hidden taxation that stems from government monetary policy.

That is why the global debt of governments has soared to the extent that International Monetary Fund calculations suggest it had reached $184-trillion in 2019 – that is before Covid added yet another massive burden.

The total cost of governments internationally more than trebled during the Covid pandemic and by mid 2023 was sitting at $6-trillion annually. Since most of us cannot comprehend that number, here courtesy of The Economist, was the July 2023 estimated total debt:

Divide that by a global population of 8.1 billion people and you get a number we can comprehend with the implication that every citizen of planet earth is responsible for $7 325 of global government debt. That, for South Africans, adds up to R132 000 each. Interest on that figure, given the South African 20-year sovereign rate of 12.09 percent in mid 2023 suggested that if individuals were to be made responsible for the interest cost it would average R15 941 each annually or four times South Africa’s minimum monthly wage.

Who to blame for this burden? The South African government? Well, although it is now pretty well accepted that basing economic planning on socialist principles rather than hard-headed realistic affordability – in other words accepting as a first principle that accumulating long-term debt is an unacceptable pathway to an ultimately failed state, the fact that South Africa has consistently run deficit budgets points to the inevitability of steadily-rising internal interest rates as the risk premium has risen over the years. So yes, we can clearly hold the ANC administration accountable for a great deal of the implied tax burden upon South Africans..

But the story does not end there The next graph on the right, courtesy of Trading Economics, traces the recent yield history of South Africa’s 30-year sovereign bonds which, because they are traded on the world market, provide a quick snapshot, as the post-apartheid years unfolded, of the ever-increasing suspicion of foreign investors that the country might not be able to repay it’s borrowings.

In December 2019, immediately ahead of the Covid pandemic SA sovereigns were among the world’s highest-yielding at 10.1 percent. Then emergency Covid relief-borrowing pushed that rate to 12.56 percent before it gradually receded to a low of 10.27 in February 2022. Then came the war on inflation with concerted interest rate increases by all of the world’s central banks and SA 30-year bond yields rose to 12.697 percent in mid-May 2023….up from 8.61 percent in May 2015 and, from 6.12 percent in December 2008 in the halcyon days before the era of Jacob Zuma’s state capture when debt first began to soar.

Just how that debt grew as a percentage of South Africa’s GDP, paralleling the yield price, is illustrated by SA Reserve Bank figures as provided by Trading Economics: from a ratio of 27.8 percent of GDP in 2008 to a peak of 70.7 percent in 2020.

Simply stated, the sharp increase in domestic interest costs during the 2022 war on inflation was simply a pimple on a rising mountain, but it inflicted massive pain on ordinary folk everywhere; on their mortgages, vehicle finance and other fixed living costs. All of that increase, you can now surely understand, was nothing other than a hidden tax burden added on top of direct taxation that was already three times higher than mankind had normally faced right up until the 20th century.

It sapped buying power out of businesses and individuals alike and was a primary cause of rising joblessness. And then came the war on inflation. It’s impact on the world’s richest society, the USA, is illustrated by the next graph on the right courtesy of the Financial Times: from a mean of 4 percent to a peak of 5.78 percent.

According to the US Commerce Department. US housing stats fell 14.4 percent month on month. Building permits, considered a leading indicator of the housing market, fell 7 per cent and selling agents Redfin noted that the number of house sales with price drops reached a record 22.4 percent.

Meanwhile in South Africa the interest rate differential arising from concerns about rising government debt took the mortgage rate on 30-year loans to 11.79 percent from 8.5 percent in July 2012.

So it is probably fair to argue that the 104 percent difference between US and South African mortgage rates was the price South African home-owners were having to pay for from the South African government’s profligacy: the ‘Rising Mountain, while the 39 percent US mortgage rate gain could fairly be ascribed to the US Federal reserve’s war on inflation. But both arguably represent a hidden tax.

How inflation impacts different communities differently can best be explained by examining the local price of an all-pervading commodity like the oil. Thus, for example although Brent crude oil prices respond in volatile fashion to economic events – note for example in the topmost graph of the following composite the very sharp oil price fall during Covid from $66 to $28.28. Overall, however, the long term price trend represented by the red trend line makes it clear that over the past 30 years the price had gained steadily at a compound annual rate of 6.2 percent.


 In order to put that figure into perspective, however, I have added the dollar price of gold as a second graph in the composite with a similarly-tracking trend line which, at compound 5.8 percent is arguably the most realistic measure we have of global inflation. With the two figures so close,we thus have a fairly realistic average of the TRUE global inflation number.

Now to bring South Africa into that picture, here is the international price of gold expressed in South African Rands during the period since the ANC government took control of the SA economy in 1994. And now we have a trend line rising at compound 12 percent!

That “double the world’s average inflation rate” measure is in one simple graph proof of why the ANC’s policy of diverting capital away from the private sector in order to, for example, create the world’s third most expensive civil service, had bestowed upon South Africa the world’s highest unemployment rate and a stagnant economy.

In summation, the cost of government everywhere is overwhelming the capacity of ordinary citizens and the wealthy alike and it is manifestly failing to deliver what citizens expect. What is thus clear is that our current systems of government are totally unsustainable; why change has to be seen as inevitable.

Neither a one-day, nor a one-person job

By JP Landman

In 2021, two researchers published a paper on corruption in the US between 1865 and 1941, a period infamous for its corruption. They distilled four lessons from that period.

  • Their first finding was that ‘it is possible to make a transition from a systemically corrupt political system to a system in which public corruption is aberrational.’ The paper specifically rejected the notion that an entrenched culture of corruption is virtually impossible to dislodge. South Africans can take comfort from that.
  • Secondly, the US transition away from systemic corruption was incremental, uneven, and slow. There was ‘no big bang’. Some you win, some you lose. Again, South Africans can relate to this as we consider the first state capture case folding (the Nulane case, which the National Prosecuting Authority (NPA) is now appealing) and the fumbling on TV of the prosecution at the Senzo Meyiwa trial. Such defeats are painful but are not the end of the story.
  • Thirdly, reduction in systemic corruption coincided with a substantial expansion of government in size and power, i.e. more resources going into the fight. Beware budget cuts for the NPA and the courts.
  • Fourthly, institutional reforms played a key role in the US fight against corruption. Progress involved a combination of ‘direct strategies (such as aggressive arrests and prosecutions), and ‘indirect strategies (such as civil service reform and other institutional changes).

The focus of this note is on the institutional reforms in South Africa.

Creating institutions

Institutional reform in South Africa started in 2019 when President Ramaphosa created a tribunal to hear Special Investigative Unit (SIU) cases and, a month later, the Investigative Directorate (ID).

(The president started ‘people reform’ a year earlier when he fired the NPA director, later the two deputy-directors, and in due course also reversed the promotions of several senior prosecutors.)

The SIU Tribunal

The Tribunal – a panel of High Court judges – started life in 2019 and only handles SIU cases. The SIU is an ‘old’ organisation which started life in President Mandela’s time as the so-called ‘Heath Commission’. Its purpose is to use civil litigation to recover public funds lost to corruption or maladministration. For years, the SIU had to join the queue at the High Court to get orders to freeze and reclaim money. Creating a separate tribunal focusing only on SIU cases sped up the process considerably. Apart from monies recovered, it has also claimed several scalps as many people lost their jobs because of SIU investigations, most notably the previous Health minister, Zweli Mkhize, after the SIU pounced on Digital Vibes.

It is noticeable that the amount of money recovered, and volume of cases handled increased after 2018. In 2022, the SIU recovered funds and assets to the value of nearly R6 billion and set aside contracts to the value of R5,5 billion. Currently, around 119 cases worth more than R12 billion are enrolled at the Special Tribunal.

The SIU and the Tribunal have become South Africa’s most effective weapons against corruption. Fighting corruption is not just about orange overalls. Losing ill-gotten gains and jobs are very much part of holding the corrupt accountable.

The Investigative Directorate (ID)

In April 2019, the president established the Investigating Directorate (ID) in the National Prosecuting Authority. The ID is a prosecutor-led agency tasked to investigate and prosecute state capture cases. State capture and corruption is the NPA’s number one priority and the ID is key to that. The ID’s first head was Hermione Cronje. She resigned after two and a half years and was succeeded by the feisty Andrea Johnson.

Experience shows that prosecutor-led investigations give better results. Readers will remember the old Scorpions which was exactly that (a prosecutor-led agency), and which was dismantled as the Zuma-era started. Luminaries like Zwelinzima Vavi and Fikile Mbalula have since admitted their mistake in supporting the abolition at the time.

To date, the ID could not quite fill that gap. It was established by presidential proclamation and can thus be disbanded by proclamation. The lack of permanence made it difficult to attract permanent staff, particularly analysts and criminal investigators. The ID has had to rely on secondment from other departments. Legislation is now in Parliament to make the ID a permanent institution with full investigative powers.

Once the legislation is passed, expect more Investigative Directorates to be created to tackle illegal mining and organised crime syndicates. As organised crime becomes more sophisticated and better resourced, so must the anti-crime institutions.

(For the record, there is criticism that the proposed legislation does not go far enough, particularly that the ID is not made a Chapter 9 institution. On the basis that the perfect need not be the enemy of the good, I will not cover that argument here.)

Currently the ID is working on 97 state capture investigations. They have enrolled 35 cases involving over 200 people (including senior politicians, civil servants, former CEOs, and corporate heavyweights like Tongaat-Huletts, ABB, McKinsey, Steinhoff and others). The ID has also secured restraining orders valued at R7.18 billion.

It is interesting to note that the UK equivalent of the ID, the Serious Fraud Office, a much older and more established institution than the ID, limits itself to about 100 cases at any given time. A targeted approach with priorities brings more success.

One of the biggest successes to date is the R2,5 billion punitive fine extracted from the global engineering company ABB for fraud committed at Eskom. The proceeds went into CARA – see below. (Back in 2020, ABB also paid R1.6 billion to Eskom to settle an investigation into allegedly criminal conduct involving contracts at the Kusile power station. They really had their hands deep in the cookie jar!)

Stronger coordination

The Anti-Corruption Task Team (ACTT) is a multi-agency team overseeing high-priority investigations and prosecutions. It brings together the NPA, ID, Hawks, South African Police Force (SAPS), intelligence services, the Financial Intelligence Centre, and others to combine resources and ‘follow the money’. As a direct result of the task team’s work, 554 suspects were arrested for corruption, of which 142 were convicted between 2019 and 2022.

The South African Revenue Service (SARS) continues to fight corruption with lifestyle audits and other legislative tools. It is piloting a new unexplained wealth initiative to recover assets suspected of having been acquired illegally or through the proceeds of crime.

When private shareholders, assisted by prominent banks, were ready to sell Tongaat-Huletts to suspect buyers, SARS stepped in with a tax claim that torpedoed the transaction. When Gupta-linked company Regiments Capital succeeded in staving off liquidation, SARS slapped it with a R700 million tax bill. Nice to see coordinated action.

Building partnerships

A further step in building better institutions is the partnership between the government and the private sector that authorises private sector resources to be made available to the NPA. The support can only be in kind, not money; and it is not with any individual companies, but with the Resource Management Fund (RMF) which also coordinates assistance to Eskom and Transnet. The partnership should help the NPA, particularly in the prosecution of complex corruption cases and in fighting organised crime.

The show goes on

In the meantime, the old workhorses of the NPA are carrying on.

The Asset Forfeiture Unit (AFU) investigates cases of organised crime and can seize assets or proceeds of criminal behaviour after it obtains a court order. Over the past five years the AFU has obtained 1 630 freezing orders to the value of R12,4 billion. (The money goes into CARA – see below.)

The Specialised Commercial Crimes Unit (SCCU), which pursues, among other cases, corruption involving the state and state-owned enterprises, has an 87% conviction rate of government officials. Interestingly enough, it obtained 52% more convictions of people from the private sector than of people from the public sector. Clearly not only public servants put their fingers in the cookie jar.

The Prosecuting Service (the biggest workhorse in the NPA), deals with around 850 000 cases per year. At 250 working days per year, which comes to 5 550 cases per day or 700 per hour! The Prosecuting Service averages a conviction rate of 90% in the High Court, 82% in the Regional Courts and 95% in District Courts. In the case of complex tax cases, the conviction rate is over 96%. Once you are in the dock you are probably guilty. Better to stay out.

CARA – the Criminal Asset Recovery Account – is where monies recovered through NPA actions are deposited. It is then disbursed to fight priority crimes and help victims of crime. Currently there is some R3,4 billion in CARA and it is earmarked for combating illegal mining operations and building forensic capacity.

The NPA cannot do it alone

The above data, however, does not tell us about the SAPS and court administration, two institutions next to the NPA, wholly independent from, but critical to the NPA’s success.

Shoddy police work undermines prosecutorial success. There is a ton of empirical evidence, from the likes of the Institute for Strategic Studies, that SAPS is a highly dysfunctional organisation. Its budget has increased, but its performance keeps declining. Money is not a problem. It is an area where both institutional and people reform are desperately needed. The president clearly needs to repeat the people reform and institutional renewal at SAPS that he initiated at the NPA from 2018.

There is not as much empirical evidence on dysfunctionality in court administration, but many cases just do not advance, and some judgements are inordinately delayed. Load-shedding does not help either, as court days are shortened. The courts are not part of the civil service and fall under the Office of the Chief Justice, complete with its own budget, personnel, and head office. Interference is correctly frowned upon. But judicial independence cannot exclude accountability for managerial and administrative weakness.

Consequences for 2021 KwaZulu-Natal (KZN) riots ongoing

The KZN riots of 2021 was South Africa’s equivalent of the attack on the US Capitol on 6 January 2021, and the Bolsonaro riots in Brazil in January 2023.

On the KZN riots, 63 people have to date been charged and 28 preservation orders have been obtained by the Asset Forfeiture Unit. The first convictions were in August and September 2022 (about 14 months after the riots) followed by more convictions this year, the latest in this month. Investigations and prosecutions are still ongoing.

Out of curiosity I looked at prosecutions in the US for the 6 January attack. The first trial took place in March 2022 (about 14 months after the event) and cases are still ongoing. The wheels of justice turn slowly.

In Brazil, the first conviction was on 14 September – nine months after the attack there. The Brazilian judiciary created a ‘fast track channel’ just to hear and adjudicate these cases. Perhaps we can follow suit with similar courts on processing certain types of priority crimes?

So what?

  • South Africa’s titanic struggle against crime and corruption is not unique. It happened in the US, Singapore, Italy, and Ukraine. China is facing it right now.
  • One lesson from the US experience is that progress is incremental, uneven, and slow. But there is progress. Monies recovered, cases enrolled, new institutions created, capacity strengthened…all of this is happening in South Africa.
  • In the process, values shift. Consider how far the body politic has come since the days when Nkandla expenditure was vigorously defended, Gupta-looting was protected by official sanction, and Bosasa cash was handed out on video. Today, it is accepted practice that people with charges against them cannot/do not contest elections. Systems do change, however slowly.
  • Another lesson from the US is ongoing civil service reform. People and institutional reform have happened in the NPA since 2018. But crime and corruption cannot be defeated by the NPA alone.
  • It is now time for people and institutional reform in other parts of the civil service, ie SAPS, the Hawks and court system.
  • The private sector also needs more accountability. Not too much action has been taken against auditors, lawyers, health professionals and other individuals in the private sector who fleece the system. Regulatory and corporate bodies have a role to play.

A Turning Time

By John Mauldin

We talk frequently about the way central banks and governments affect the economy. In the grander scheme of things, though, whatever the Fed does is more like throwing a hand grenade into a large building. Yes, you’ll make some noise and cause some damage. People may be hurt. But the building won’t care, and the owner will fix it.

Economically, what really matters, in the long run, is Human Action, the kind Ludwig von Mises called “purposeful behavior.” We all make choices that reflect our backgrounds, experiences, and environments. These choices add up to form “the economy.” Adam Smith called it the Invisible Hand.

But these choices aren’t purely voluntary. We face external constraints, and not just from governments. As humans, we’re subject to time and space. Our choices reflect the era in which we live and the others who share it. This affects our choices and, thus, the kind of economy we collectively create. And it changes over time.

Today, I’m beginning a series of letters on these big-picture thoughts, prompted by Neil Howe’s new book, The Fourth Turning is Here. It’s available at your favorite bookseller now. This is an update of Neil’s 1997 work with the late William Strauss. Their concept of generational turnings has entered pop culture, but unfortunately, not everyone has read their books, which have much more insight than most realize. I want to help give you a broader understanding.

In future letters, we’ll dig into other long-term cycle theories by George Friedman and Peter Turchin. Both foresee something similar to the Fourth Turning at about the same time but for entirely different reasons. That’s quite interesting to me. Then we’ll visit my thoughts about my own view of the “fin de siècle” (which wording I use to suggest the end of an era and the beginning of a new era) I have termed the Great Reset, the end of the Debt Supercycle. That these various ways to look at cycles in history seem to be pointing to a tumultuous period just ahead seems more than coincidental to me.

I think the seminal cycle work is by Neil Howe and his partner William Strauss (who tragically died in 2007 of cancer) in the late 80s and the early 90s in their first book, Generations: The History of America’s Future, in 1991, and then culminated in the scarily prescient The Fourth Turningistoruy of America’s future: An American Prophecy in 1997. They laid out a picture of how American generations progress and, in general terms, what was likely to happen over the next 25–20 years. They made rather specific suggestions and predictions that have generally turned out to be true, which only grows the very deserved following the book has developed.

I have reviewed The Fourth Turning before, recommended it numerous times, and feel it is one of the top five books of the last 30 years. Note that I have developed a very close relationship with Neil Howe, so some of that might leak into my viewpoint, but our relationship has gone far past the fanboy stage. We regularly hold long conversations that, to some observers, might seem like steel on steel, but we do help each other focus our thoughts. As an aside, Neil is one of the most widely read historians I’ve ever had the pleasure of associating with. He always has an anecdote.

The Fourth Turning is Here gives us a view of the future landscape of the economic, political, social, and geopolitical pressures that will be building up over the next 5–10 years. The book is not prescriptive in the sense of it can tell you precisely what to do to avoid the projected turmoil, but it describes the pressures that we will face. I highly recommend you read it.

While all these books talk about a tumultuous period, understand that each viewpoint ends up with a far less tumultuous period following it, and, in fact, the era/period that follows is generally one of stability, order, and advancement on all fronts of the country. Unfortunately, we can’t skip to the end. We have to go through the entire period.

To understand Neil’s outlook, you need to know where he derives this “turning” idea. So we’ll start at the beginning. This will set the stage for my next few letters. It’s important to know these basics so we can explore how to use this for our own planning. So let’s dive in.


The core idea behind the Fourth Turning (and the other three turnings that precede it) is a repeating pattern of four society-driving, generational “archetypes.”

Howe and Strauss observed how societies change in a cycle as each generation assumes cultural dominance in its middle age years. The interplay between the dominant generation, the fading one that preceded it, and the upcoming younger generation follows an almost musical rhythm.

At the same time, each generation isn’t just an extension of the last one. No generation is like the preceding one. Rather, generational change corrects excesses, ultimately sustaining a stable society. Otherwise, civilization would have collapsed long ago.

In The Fourth Turning, Howe and Strauss identified four types of generation: Hero, Artist, Prophet, and Nomad. They call these “archetypes,” and each consists of people born in a roughly twenty-year period. As each archetype reaches the end of its 80-year lifespan, it is replaced with a new generation of the same archetype. (Note: with longer lifespans, the 80-year generational cycle may become longer.) Each archetype/generation proceeds through the normal stages of life: childhood, young adulthood, mature adulthood, and elderly years. Each tends to dominate society during its middle age years (40–60), then begins dying off as the next generation takes the helm. The change of control from one generation to the next is called a “Turning.”

Here’s a look at the archetypes and how they match the generations we know today.

The archetypes aren’t neatly divided by the calendar; they are better seen as a continuum. People born toward the end of a generation share some aspects of the following one. Individual differences can also outweigh generational identity for any particular person. The archetypes simply describe broad tendencies which, at the societal level, add up to noticeable differences.

Hero generations are usually raised by protective parents. They come of age during a time of great crisis. Howe calls them “heroes” because they resolve that crisis, an accomplishment that then defines the rest of their lives.

Following the crisis, the Heroes become institutionally powerful in midlife and stay focused on solving great challenges. In old age, they tend to have a spiritual awakening as they watch younger generations work through cultural upheaval.

The “G.I. Generation” that fought World War II is the most recent example of a Hero archetype. They built the US into an economic powerhouse in the postwar years and then confronted youthful rebellion in the 1960s. Further back, the generation of Thomas Jefferson and James Madison, heroes of the American Revolution, experienced the religious “Great Awakening” in their twilight years.

Artists are the children of heroes, born before and during the crisis but not old enough to be an active part of the solution. Highly protected during childhood, Artists are risk-averse young adults in the post-crisis years. They see conformity as the best path to success. They develop and refine the innovations forged in the crisis. Artists experience the same cultural awakening as Heroes but from the perspective of mid-adulthood.

Today’s oldest retirees are mostly artists, part of the “Silent Generation” that may remember World War II but were too young to participate. They married early and moved into gleaming new 1950s suburbs. The Silent Generation went through its own midlife crisis in the 1970s and 1980s before entering a historically affluent, active, gated-community retirement.

Prophets experience childhood in a period of post-crisis affluence. Baby Boomers like me are a Prophet generation. Not having known a real crisis, Prophets often see (or perhaps create) cultural upheaval during their young adult years (I remember the ’60s!). In midlife, they become moralistic, values-obsessed leaders and parents. As they enter old age, prophet generations lay the groundwork for the next crisis. (Oh, did we Boomers ever do that, and in spades!)

Nomads are the fourth and final archetype. They are children during the “Awakening” periods of cultural chaos. Unlike the overly indulged and protected Prophets, Nomads go through childhood with minimal supervision and guidance. They learn early in life not to trust society’s basic institutions. They come of age as individualistic pragmatists.

The most recent Nomads are Generation X, born in the 1960s and 1970s. Their earliest memories are of faraway war, urban protests, no-fault divorce, and broken homes. Now in mid-life, Generation X is trying to give its own children a better experience. They find success elusive because they distrust large institutions and have few strong connections to public life. They prefer to stay out of the spotlight and trust only themselves.

After the Nomad Archetype, the cycle repeats with another Hero generation. The Millennial Generation, born from 1981 through about 2003, is just beginning to take root in American culture. They are a large generation numerically, filling schools and colleges and propelling new technology into the mainstream. If the pattern holds, they will face a great crisis. It will influence the rest of their lives just as World War II shaped the G.I. Generation Heroes.

That’s where we are now: The Fourth Turning.

These four generational archetypes literally created Anglo-American history. A new era, or “Turning,” begins every twenty or so years. As with generations, the Turnings also unfold in a recurring pattern.

Four turnings bring a complete cycle matching the 80- to 90-year human lifespan. The Romans used the word “saeculum” to describe this length of time, meaning “a long human life” or a “natural century.” In their earlier book Generations, Strauss and Howe outlined seven full saecula going back to the 15th century. Much like the changing seasons, the turnings within each saeculum follow a similar pattern.

  • The first turning is called a High, a confident time in which social institutions are strong, and factions pull together for the greater good. (Note: that is the halcyon period after a Fourth Turning, our light at the end of the tunnel, and is why I am so optimistic about the 2030s.)
  • The second turning is the Awakening. This period is marked by cultural and religious renewal—changes accompanied by resistance and conflict.
  • The third turning is an Unraveling. People lose trust in institutions and embrace individualism.
  • The fourth turning is the Crisis, a time of major upheaval when some great threat forces a redefinition of core institutions and public behavior.

US history suggests the pattern is more than coincidental. Let’s look back, beginning with a day everyone believes will live in infamy: December 7, 1941. The Japanese attack on Pearl Harbor marked a new crisis for a nation already facing the Great Depression.

Eighty-five years earlier, Confederate forces fired on Fort Sumter, launching the Civil War, which redefined states’ rights and individual rights.

Dial the calendar back another eighty-five years, and we find a group of men in Philadelphia signing the Declaration of Independence.

The pattern continues: four generations before the American Revolution, our mother country experienced the 1689 “Glorious Revolution,” one lifespan after the English navy defeated the Spanish Armada, which followed the bloody War of the Roses, creating Tudor England as a modern nation-state by a century.

Halfway between these crisis periods were Awakening periods like England’s Protestant Reformation and the 1960s’ American spiritual and social upheaval. As with the seasons, the turnings unfold gradually, almost unnoticeably at first.

Social forces drive the turnings just as planetary forces create seasons. They aren’t rigidly defined; we experience warm autumn days and springtime cold fronts. But at any given time, four generations are alive: children, young adults, middle-aged, and the elderly. Each generation experiences history from its own perspective. If you were six years old, listening to the radio with your 65-year-old grandmother on December 7, 1941, you both heard about Pearl Harbor together. Your reactions, however, were quite different. You were on the way up. Grandma was on the way out.

The character of each turning follows a pattern rooted in the position of each generational archetype. Neil describes these in detail in the books. For our current purposes, the important point is that each saecula ends with a Fourth Turning. Not just a rough stretch but a crisis of such magnitude that the nation’s survival is an open question. To resolve it, society’s strongest pillars have to be torn down and replaced.

We are experiencing the latest Fourth Turning now. Its exact parameters will be clear only in hindsight. When it’s over, we will have been through something comparable to the last Crisis turning, which encompassed the 1929 stock market crash, the Great Depression, and World War II.

No one in their right mind wants to re-live that period or anything resembling it. But what we “want” doesn’t really matter. It is what we’re going to get. Indeed, it is already underway.

This major upheaval doesn’t have to include war, or at least the calamitous shooting wars of past cycles. Hopefully. But anyone who thinks the current cultural antagonisms, rabid partisanship, unrealistic expectations, geopolitical turmoil, and the staggering accumulation of debt will end with a whimper isn’t paying attention.


Read the book reviews, and you’ll see a common criticism: All this repeating cycle stuff is just too neat, imagined with the benefit of hindsight. Academic historians say history isn’t nearly so well organized. Those are fair points. I would note, however, that all history has the benefit of hindsight. That’s why we call it “history.” We can still learn much from studying it.

I think this points to the real usefulness of Neil Howe’s work. Are the patterns he describes real? It seems so to me. They derive from the natural cycle of life, which isn’t random. People are born, they live, they die, and along the way, they do things appropriate to their age, heavily influenced by their generational peers. The idea these forces can coalesce into broader patterns seems plausible. Such patterns can be meaningful even with exceptions.

This is similar in some respects to economic forecasting. As I often say in my January forecasts for the year, a forecast can be useful even when it’s not right. How can that be? Because the forecast, right or wrong, at least serves as a starting point. It gives us a frame of reference that highlights conflicting data we should consider.

I believe this summer of 2023 is as close to relative “peacetime” as we will get between now and the end of the decade. Those who make no plans will be subject to the whims and vagaries of outrageous fortune. Those who make even imperfect plans (they likely will be) will have created signposts they can use to measure their progress and make course corrections.

By using the best historical guideposts that we have today, we can at least try to avoid the major problems. The goal should be to get through The Fourth Turning (or the terms other authors use, as we’ll explore in later letters) with as much of our family, friends, countries, and personal worth as possible intact and even thriving.

Archetypes and Turnings help us organize our knowledge of the past and think about how it may apply to the present. Neil Howe is the first to say we shouldn’t take the cycle too rigidly. It evolves over time, just as society does. Longer life expectancies could lengthen the cycle from 80 years closer to 100 and perhaps beyond if age-reversal biotechnologies develop, as I expect. Delayed childbearing has an effect as well. Neil addresses many other criticisms in The Fourth Turning is Here, which I highly recommend. It is over almost 500 pages (plus copious footnotes) and contains far more detail than I can describe here.

Who wants to be a billionaire (in rands)?

By Brian Kantor

Peter Bruce has pointed to something in the Stellenbosch water of the late sixties and seventies that produced so many rand billionaires. They would not have been inspired by some professor of economics enthusiastic about the power of free markets telling them to do good for the nation by getting rich.

They are much more likely to have been told the opposite. Told why markets will not work nearly well enough and that any faith in entrepreneurial flair would be entirely misplaced. I have yet to meet a Stellenbosch economist who believes that an economy is best left guided by the forces of competition.

And one can perhaps understand why. The interventionist economic policies, long adopted in SA before 1994, clearly helped to completely transform the economic and educational status of the Afrikaner nation, in a generation, both absolutely and comparatively. They might have done even better with freer markets, but this would not have been self-evident. By every measure, the Afrikaner, on average, lagged well behind the standards enjoyed by the average English speaker in the nineteen thirties. By the sixties they had caught up even as the average incomes of both communities had improved significantly.

Many of the best and brightest Maties sought their futures working for the state and its agencies. The case for ownership by the state of some of the commanding heights of the economy, steel, electricity, railways and ports was taken as a given and not contested. And they were not, with few exceptions, seen as the path to private riches through corrupted procurement and biased tenders to which SOE’s are so conspicuously vulnerable.  Nationalism and strong sense of community may have had something to do with this restraint.

Perhaps with Johan Rupert a fellow student, the example of the ineffable Anton Rupert was the inspiration. He who went door to door selling shares in his fledgling enterprise that was to take down a powerful near monopoly of the cigarette market in SA. The billions of the Stellenbosch cohort, like those of the Ruperts, were made in a conventional way.  By competing successfully with established businesses for their customers and executing better combined with intelligent financial engineering that is always the leveraged and risky path to great wealth. Taking the opportunity provided by contestable markets is characteristic of successful, dynamic economies.

Peter Bruce is quite wrong to assert (Business Day July 27th) That Stellies route to billions is gone — and it’s undesirable. Apartheid-era billionaires can’t be reproduced in today’s democratic conditions.

It would be highly desirable were the South African economy to produce a few more billionaires in a similar old-fashioned way. By taking on established interests, winning market share and reviving businesses that have lost their way and are now valued at far below what can be regarded as their replacement cost. With the help of value-adding, better designed financial structures and appropriate incentives for managers based on what really matters, return on all capital employed. It seems to me the opportunity to acquire great wealth in rands and dollars is as open, perhaps more open than it has ever been given current market pessimism.

The aspirant billionaire will not have to rob the taxpayer to get rich – though it is still unfortunately the most obvious route. Yet more than a few new billionaires are hard at work proving my point that Bruce may not have noticed from his rural retreat.

Though admittedly a billion rand today is a lower target, worth a lot less than a billion in 2000 – about 35% as much, after SA inflation. To compare purchasing power in US dollars, you might do as the IMF does – divide billions of rands by 7 not 19 to convert SA GDP into purchasing power dollar equivalents. If the rand just compensated for differences in SA and US inflation since 2000, a dollar would cost R13.5 and a billion rand would buy the equivalent of USD74-m – more than nickels and dimes.

The exchange value of the Rand (USD/ZAR) and its purchasing power equivalent

The Next 100 Years

Jared Dillian

By Jared Dillian

Over the last 100 years, the US equity market has returned about 9% annually. What will it return over the next 100 years?

Well, the index fund promoters say that history will repeat itself and that the next 100 years will look like the last 100 years, so you should go to and put all your money in the Vanguard Total Stock Market Index Fund (VTI).

I don’t believe this to be true.

Stocks are loosely correlated to corporate earnings, which are loosely correlated to economic growth. Economic growth has been gradually slowing over the last 100 years. I predict it will slow further.

Our Work Ethic Has Disappeared

Output is a function of hours worked, effort, and productivity. In the future, people will work fewer hours and won’t work as hard. I have a nose for social and cultural trends, and I know how hard people worked in 1999, and I know how hard people work today. There is no comparison.

Part of this is because of the pandemic, which served as some kind of psychological shock—people decided that they now value leisure more than output. There are places in the world where people traditionally value leisure more than output, like Europe, where stocks have returned zero over the last 15 years. The good news is that productivity continues apace—ChatGPT is a good example of that, a productivity miracle.

I don’t want to call this laziness because that’s not what this is—it’s a shifting of priorities. Twenty-five years ago, it was pretty common to see people working two jobs. Now, it is a rarity.

I went to the Walmart pharmacy two weeks ago, like I do every month, and saw Kristin, the tech. I commented that she works some pretty long hours, from 11 am to 7 pm. She told me that she works another job after that. That’s admirable and uncommon. Most people would rather go home at four o’clock, have an edible, and watch some shows.

Our hustle, our work ethic, has disappeared, and there are economic consequences to this, which nobody is talking about. There is no such thing as a free lunch. If you want money, if you want prosperity, you have to work long hours, you have to work hard, and you have to work productively. Don’t get me started on the “quiet quitting” and “lazy girl” trends.

The Economics of It

For a while, trend GDP growth was about 4%. Then it dropped to 3%. We’ll be lucky to achieve 2% in the future—I think it will be closer to zero or 1%. And if we have GDP growth of 1%, it is unlikely that stock market returns will be anywhere near 9%. And if stock market returns are going to be nowhere near 9%, then it doesn’t make much sense to put your money in VTI.

Some people say that what worked in the past will work in the future. But that’s an article of faith, right? There is no rule that says that stocks must return 9% a year. If the conditions that were present for the last 100 years are not present for the next 100 years, then it would be a mistake to invest in stocks.

Alternatively, we might get our 9% return, but after a decade or more of negligible returns. We have had such periods in the past, from 1929–1945 and 1969–1982. We may be entering one of those periods. I think that is more likely than not. There may be other, better investment opportunities over the next 10 years. Maybe gold. Gold did pretty well from 1969–1982.

Stocks Ain’t for the Long Run

Speaking of faith, a lot of people, years later, still believe that stocks are for the long run. I think that the bear market will continue until people are disabused of that notion. I believe that the bear market will continue until people question the most fundamental tenet of investing: that stocks return more than bonds and all other asset classes.

We have gotten to this stage in the past, in 1982, with the “Death of Equities.” We could get there again. Thirteen years of crappy returns wore out a generation of investors, forcing complete and utter capitulation right when they should have been buying stocks. Even after an ugly 2022 and 21 months under the high-water mark, people will believe in stocks. (Side note: They no longer believe in bonds.)

I haven’t even begun to discuss the demographic argument, where a generation of boomers engage in dissaving and liquidating stocks to fund current consumption. That argument carries some weight.

I am not so optimistic about the stock market on a long-term basis. And I think it’s because of a change in attitudes toward work and productivity. We have forgotten how to hustle.

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