THERE IS A NEW SHERIFF IN TOWN

• 26 March 2025
• Barry Mendel

Our latest research trip to the UK and Switzerland was very opportune as the political landscape around the world is changing and this in turn provides a Rethink and a Reset to one’s economic outlook for the future and for the protection of your assets. With Tariffs being the new game in town and with not much we can do about it from Australia, there is a definite need to readjust the sails.

Over the past 7 years commencing 1 January 2018, we have suffered 3 bad years – 2018 the markets globally were severely down. 2020 was the commencement of COVID and common sense went out the window. 2021/2022 was another globally down year when the lock downs were in full swing! On top of this, from May 2022 until November 2023 we had 13 interest rate hikes. This rate hike was a global phenomenon, but it disrupted normal investment thinking and themes. Obviously the first casualty was Real Estate, especially commercial real estate which was marked down by valuers as there were so few sales (or even none) in respected markets that the valuers did not have clear judgement.

So, within those 7 years our client portfolios did well, always depending on the portfolio size and on restrictions placed upon us. We kept our portfolios protected by being diversified, by owning Gold, by not being overweight equities, owning Debt Funds, owning Private Equities and some Real Estate. To compare our results to the equity markets (as at 14 March 2025), were you to have 100% RISK, the ASX 200 over the past 7 years has only returned 5.3% p.a., the MSCI Europe Index returned 7.4% p.a., the UK FTSE 100 returned 3.6% p.a. and the MSCI All Countries Asia Index returned 0.6% p.a.. The only market to really outperform was that of the USA which returned 14.8% p.a. mainly caused by the “magnificent 7” shares which probably counted for approximately 50% of the USA returns.

We are happy that our clients have survived such turbulent times, survived them well and the only real mark downs on portfolios are from Real Estate but this asset class in now showing signs of recovery and patience is required.

As most of you are aware, GOLD has been our number one asset in both bullion and shares. How right we were.

Gold bullion in the last 12 months returned 44.8% while our gold equities too did well like Evolution Mining up 97.7%, Gold Road Resources up 65%, and even Barrick Gold and Newmont recovered by 17.2% and 39.8% for the past 12 months.

Our research trip covered over 55 presentations/meetings, including meeting with two renowned economists, meetings with some great fund managers, and attending a conference in London with UK Fund specialists, including covering AI funds.

The attendees at the 3-day conference on Private Assets in Zug, Switzerland were from 35 countries and collectively represented US$10 trillion.

We had the privilege to listen to two former Prime Ministers, one from the UK and the other from Finland, the latter giving us a perspective on Russia. We also had a presentation with Sir Ben Wallace, Former British Secretary of Defence.

Between Jill and I, we took down notes covering almost 280 pages and brought back to Australia heaps of prepared notes, charts and other relevant information. It would be impossible to type out all our notes but rather we will provide a brief synopsis in point form before we have the opportunity to meet.

1. There are many opportunities for investments around the world that we need to consider
2. The UK Equity market is cheap; rates are coming down but they need to continue to do more quickly
3. The UK Equity Market is valued at a discount of 40% to historical measures
4. UK Residents are saving double the amount now compared to their savings pre-Covid due to high interest rates. They are saving approximately 40 Billion pounds per quarter.
5. The entire UK Equity market is smaller than Nvidia
6. The USA is a conducive business environment, is innovative, has an entrepreneurial and shareholder culture and is relatively attractive re demographics
7. The world is short of Commodities and Young People
8. Copper is forecast to go much higher
9. “Who owns the Data wins the race”
10. USA is the clear outperformer while Germany is the clear underperformer
11. There are two reasons why the USA is ahead of Europe: Consumption and Productive Investment including Energy
12. Many Countries are becoming concerned in owning USA Treasuries and therefore are buying Gold which is an asset valued in USD
13. The USA Stock Market is now 70% of Global Markets – it has never been as high in normal times, historically it’s closer to 50%
14. ChatGPT uses 10x more energy than Google Search
15. The reconfiguration of the Economy is starting today – Tech and AI are an intrinsic part of our daily lives and as well Robots are coming and quickly (we saw a Robot playing badminton with a real live person!)
16. Data Centres are in demand and that means energy will be in even greater demand
17. Both Prime Ministers agreed that Europe needs a wake up call – Europe is a declining continent with its policies over the past 20+ years. Europe is over regulated and is trying to “pre-regulate” compared to the USA.
18. Europe and the UK have to urgently deal with migrant crisis
19. The USA has a higher GDP than China, Germany and Japan COMBINED
20. Digital is infinite
21. USA is growing & spending, Europe is flat & saving
22. The world has shifted to a new order of independence versus inter-dependence
23. Countries want to be as independent as possible
24. Europe is a declining continent, Europe is underachieving, can do better
25. Spending on defence, particularly for Europe, is set to escalate.

From the above, which is just the tip of the iceberg, you may realise that we came across many new investment opportunities as well as adding to some of our current investments. There are new private equity investments to consider, a new Gold fund at an early stage, certain sectors internationally like Financials and AI related could be interesting, a new Infrastructure Fund which has a significant investment in Data Centres, we met again with one fund manager in the UK which we have decided to withdraw our clients funds as we have better alternatives.

On one cautious note, no-one we met thought that the USA economy is going to go into a recession. This is contrary to the newspaper reports that are currently predicting this scenario. Ironically the Tariffs could cause the recession, but we think such recession would be temporary (and assets would be available at even cheaper values). Central banks would likely revert to quantitative easing and inject global liquidity into the markets. Global liquidity is a key driver of asset markets.

The title of this Newsletter, “THERE IS A NEW SHERIFF IN TOWN” has been used because this topic came up many times. The bottom line is that you may or may not like the USA Administration, but in reality, they control the economic world in which we live. We need to think outside the box and use the opportunities that are being presented to us and to concentrate on returns for our clients’ benefits.