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ROBERT COWEN INVESTMENTSNEWSLETTER – END AUGUST 2020

3 September 2020

“Silence is golden, and gold is up these days, so silence is a solid investment.” Jarod Kintz

“The surest sign that intelligent life exists elsewhere in the universe is that it has never tried to contact us.” Bill Watterson

HIGHLIGHTS OF THIS NEWSLETTER ARE:

• A month in markets – August 2020

• A time to buy and a time to sell – By Eric Lappeman

• Will a Donald Trump win affect markets? By Sergei Klebnikov & Halah Touryalai

• What streaming services can learn from Netflix – By Nicholas Grous

• Charts/Memes of the month

• RCI Unit Trusts

• RCI – ‘The Family Wealth Office’ – What we offer

A few interesting articles to read when you are done with this newsletter:

➢ 2020 Presidential Election Polls or 2020 Presidential Election Polls

➢ Warren Buffett Buying Gold May Push Bitcoin to $50k...

➢ A useful website to track coronavirus numbers

Note: If any of our clients wish to be added to the Anchor research and news mailing list, kindly let us know andwe will gladly add you.

*If you know of anybody who would like their financial affairs looked at, please do not hesitate to send themour contact details and we will ensure we get back to them with a proposal plan. They can contact us ateric@rcinv.co.za or 082 561 3124.

Global equities gained for another month in August, knowing the Fed would do whatever it takes to keep the markets

liquid, stable and functioning. With the extraordinary recovery in the market since the March lows, thanks primarily

to the massive amounts of stimulus, investors have become ultrasensitive to guidance from the Fed.

Following the end of a particularly solid Q2 reporting season, most high-flying tech shares continued to put further

runs on the board. Apple became the first ever U.S. company to reach a $2trillion market capitalization, and Tesla

jumped a staggering 74% in August, helped in part by a 4 for 1 stock split. Value also experienced a strong month

with the likes of travel-related shares posting a strong rebound. The S&P500 gained 7.2%, while the Nasdaq rallied a

further 11.5% for the month. Locally, The JSE All Share declined 0.3% in ZAR, as SA Inc continues to miss out on the

global rally. The Rand gained a further 0.8% against the US Dollar, to close at R16.94 as we continue to see the dollar

weaken slightly. The RCI Worldwide Flexible Fund and RCI Growth Fund closed up 5.98% and 4.13% for the month

and are now ranked 3rd and 1st in their respective categories over the last year. The RCI Growth Fund is now up

54.23% over the last 12 months and is ranked 3rd over the last 3 years.

On the commodity front, despite a strong rebound in risk assets, traditional portfolio hedges such as gold held up

well, only down 0.4% for the month and still up 29.7% for the year to date, while oil continued to recover (up a

further 4.6% for the month). Iron Ore had a strong showing too, up another 14.7% during August. Among shares that

made large moves, in what can be summed up as a rather lacklustre month for SA equities, platinum shares, such as

Royal Bafokeng and Northam pushed higher on rising PGM prices. Interesting to see Foschini up another 9.7%

following last month’s bid for Jet stores. On the other hand, property shares continued to dominate the

underperformers in August, with the likes of Hammerson, Fortress and Mas Real Estate all falling sharply during the

month, suggestive of the sector continuing to see widespread redemptions from investors.

The market is entering the weakest part of the calendar year for stocks, and the upcoming election could amplify any

market jitters. More positive vaccine-related news should help. The FED too, has given a nod to a “risk on” market

with its ultra-accommodative “lower for longer” policy, as it stays focused on healing the economy. Concerns of a

possible “fiscal cliff” haven’t completely vanished, and with markets at all time highs, and already stretched

valuations, we recommend investors exercise caution.

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A MONTH IN MARKETS AUGUST 2020

By Eric Lappeman

Indicator Closing level

Monthly

Move Y-T-D Indicator Closing level

Monthly

Move Y-T-D

Equities Currency

MSCI World Index (USD) 2456 6.7% 5.7% USD/ZAR 16.94 0.8% -17.4%

S&P500 (USD) 3500 7.2% 9.7% GBP/ZAR 22.62 -1.3% -17.8%

FTSE 100 (GBP) 5964 1.8% -18.9% EUR/ZAR 20.20 -0.4% -22.3%

Nikkei (JPY) 23140 6.6% -1.0%

MSCI Emerging Markets Index (USD) 1102 2.2% 0.7% Commodities

JSE All Share Index (ZAR) 50483 -0.3% -0.9% Gold Spot (US$/oz) 1 968 -0.4% 29.7%

JSE All Share Index (USD) 50483 -0.5% -21.6% Palladium PM-fix (US$/oz) #N/A N/A 5.4% 14.2%

JSE Capped Swix All Share Index (ZAR) 19246 -0.9% -8.8% Platinum Spot (US$/oz) 932 2.9% -3.6%

RCI BCI Worldwide Flexible Fund (ZAR) 174.15 6.0% 34.5% Copper Cash LME (US$/ton) #N/A N/A 4.3% 8.9%

RCI BCI Flexible Fund (ZAR) 324.01 0.0% 6.8% Iron Ore (US$/ton) 118 14.7% 42.7%

RCI BCI Growth Fund (ZAR) 174.22 4.1% 45.8% Brent Crude ($/Barrel) 45 4.6% -31.4%

Bonds

US 10 Year Treasury yield 0.70 -0.9% 11.2%

SA 10 Year Govt Bond yield 9.29 0.9% -8.8%

Percentage Rise Percentage Drop

TEXTAINER GROUP HOLDINGS LTD 33.9% FORTRESS REIT LTD-B -24.0%

ITALTILE LTD 33.3% REDEFINE PROPERTIES LTD -22.3%

ROYAL BAFOKENG PLATINUM LTD 28.7% TELKOM SA SOC LTD -21.6%

PSG GROUP LTD 27.1% ECHO POLSKA PROPERTIES NV -19.9%

ALLIED ELECTRONICS COR-A SHR 20.5% HAMMERSON PLC -16.7%

NORTHAM PLATINUM LTD 19.4% CAPITAL & COUNTIES PROPERTIE -12.4%

CARTRACK HOLDINGS LTD 11.2% LIBERTY HOLDINGS LTD -12.0%

THE FOSCHINI GROUP LTD 9.7% OCEANA GROUP LTD -11.3%

AFRICAN RAINBOW MINERALS LTD 9.6% NEPI ROCKCASTLE PLC -10.9%

DISCOVERY LTD 9.2% ANGLOGOLD ASHANTI LTD -10.8%

MONTHLY MARKET MATRIX

MAJOR MOVES IN SHARES

A TIME TO BUY AND A TIME TO SELL…

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BY ERIC LAPPEMAN

With US markets at all time highs, and some shares having doubled, tripled and even quadrupled, in a matter ofmonths, whilst still in the midst of a global pandemic, I sit here asking myself if now is the time for a wardrobechange… I ask this question because a wise friend of mine once gave me some great advice.

You see, this friend of mine loved the stock market, but more than that, he loved gambling. He loved the ponies,particularly the daily double, and most of all, he loved the slots. Now, I’m more of a poker guy, but my friend justcouldn’t walk past a “one arm bandit” without throwing away some money! Funny thing though, he always hadgood luck at this total game of chance, and I’m not just talking about a row of cherries here. I'm talking peaches,plums, even three bars…

One time, many years ago, we went to Sun City with a group of mates for our annual golf tour. Beforeunpacking, we headed up to the casino. He was an unstoppable force that day. He pulled and pulled, andI swear, the worst he pulled was three lemons. There was a pile of coins so high, I was worried we’d getrobbed! It didn’tmatter though. He was Hot Hot Hot! Then, out of nowhere, he turned to me and he said“we’re done”. I was left speechless. I’d never seen anybody with that much “mojo” just stop. In my mind,it was time to keep going, not stop. I begged him; “You are on a run”, I said. He just shut me down.“Eric”, he said, “we’re out of here”. “We’re going to take some of these winnings and go buy some newgolfing shoes for tomorrow’s tournament”. I told him, “It may never be this good again”! He said, “Letothers make some money”. With that, he stumbled over to the cashier, swapped out the mountain ofchips for a handful of crisp R200 notes and walked out. Then we went to the store and bought those wellsought after golfing shoes. This lesson has stuck with me for over 10 years.

Sometimes, we have to quit a little while we are ahead. Right now, we have the smoking hottest stock marketmost of us have ever seen, and, at the moment, it appears to be rewarding companies for success moregenerously than at any time we can remember. Not 1998, not 1999, not even like the insane dotcom explosionin 2001. This bull market is one of a kind. In fact, some of the moves we have seen recently seem to beextraordinary:

Warren Buffett, the “Oracle of Omaha”, is well known for many things, including the quote “We simply attemptto be fearful when others are greedy and to be greedy only when others are fearful”. Every time markets start tobecome irrational; it pays to take a step back and ask ourselves where we are in the cycle below:

A TIME TO BUY AND A TIME TO SELL

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CONTINUED…

With upward moves like these, one cannot help but to feel FOMO (Fear Of Missing Out) and look like an“idiot” for selling anything as the market moves higher. Why don’t we just banish the register, so we neverhave to cash out, right? Why ever leave the stock casino with some cash in hand, when we can keepwinning? It’s simple; while stock picking is a game of skill, there is still a very large element of chanceinvolved. Perhaps not as much as the slots, but what if Fed Chief Jay Powell decides, at some point, that theeconomy is just too hot and crushes us at the next Fed meeting? Maybe the US has borrowed too muchmoney, and interest rates start to rise as it funds the most debt in history. Maybe the economy rolls over ifcongress cannot pass another stimulus package. Maybe the tensions with China start to escalate intosomething more serious than a trade war. The point is, we do not know the future has in store for us. Thereis always the chance that something bad can happen and those “once untouchable winners” come crashingdown.

In the big picture, it doesn’t really matter what the next piece of news is. In fact, I actually believe that weshould see a fair bit of good news coming out soon. It wouldn’t surprise me to see some more positivedevelopments on the COVID-19 front over the next few months. Either way though, there is a large segmentof the economy that is on fire right now, even as the virus continues to decimate other sectors. The point is,to this day, I still own those golfing shoes. I still own those golfing shoes because of my friend's great advicethose many years ago. Nobody ever went bankrupt taking some profits. Perhaps, prudent portfoliomanagement might even advise looking to use this opportunity to trim some roses and restructure the riskof your long- term portfolio to something that allows you to sleep a little better at night.

It may be time to ring the register on some of your positions, so that you play with at least some of thehouse’s money. At the very least, it is the prudent and responsible thing to do.

My friend didn’t know much about the Fed, interest rates, stimulus or any of that economic speak, but hehad common sense, and common sense says that, even if you have the hottest hand in the world, whenyou're up big, you’ve got to look to take some profits to go buy yourself some of those new golfing shoes ;)

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BY SERGEI KLEBNIKOV & HALAH TOURYALAI

Conventional wisdom says that those liberal Dems are generally bad for the economy and the stock marketbecause of their big government tendencies, while fiscally conservative Republicans are good. This widelyaccepted belief is actually fake news if you look at data going back to the end of World War II.

“Stock markets do perform better under Democrats than under Republicans. That’s a well-known fact, but itdoes not imply cause and effect,” says Jeremy Siegel, the Russell E. Palmer Professor of Finance at the WhartonSchool of the University of Pennsylvania. From 1952 through June 2020, annualized real stock market returnsunder Democrats have been 10.6%, compared with 4.8% for Republicans.

With the 2020 election less than four months away, some investors are fretting about the pros and cons of aTrump vs. Biden presidency. A Democratic sweep would almost certainly mean a rollback of Trump’s massivecorporate tax cut (a negative for stocks), but additional economic stimulus (which the market apparently lovesdespite deficit implications) and stability on the China trade front would be a big positive.

WHICH PRESIDENTS HAVE DELIVERED THE BEST STOCK RETURNS? SO FAR DEMOCRATS ARE DOMINATING.

WILL A DONALD TRUMP WIN AFFECT MARKETS?

Source: YCharts, Forbes

According to Siegel, author of the 1994 investment classic Stocks For The Long Run, Wall Street’sobsession with politics is mostly misplaced: “Bull markets and bear markets come and go, and it’s moreto do with business cycles than presidents.” In some ways the current environment has characteristics ofthe existential threat faced by George W. Bush post-2001 (replace terrorism with pandemic), the civilunrest that plagued the Johnson and Nixon administrations and Ronald Reagan’s trade war with Japan inthe 1980s._____________________________________________________________________________________

At RCI we try to focus our investment efforts more on factors we can control, such as the price we pay forshares, more so than spending too much time on macro factors that are out of our control.

WHAT STREAMING SERVICES CAN LEARN FROM NETFLIX

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BY NICHOLAS GROUS

Video streaming services don’t need great content to grow: they need content, period. Whilecounterintuitive at first, think about your own viewing habits. Are you watching only programming that hasbeen nominated for Emmy and Oscar awards? If not, you are not alone. Unscripted reality shows accountfor roughly 70% of primetime TV consumption, suggesting that many viewers are okay with mind-numbinglyaverage content [1]. While quality content is important, other factors are going to determine success in the‘Streaming Wars’. We believe the winners will have the most content, not just the best.

Exceptional content requires active, committed viewing, but most users consume content passively, asbackground noise. In other words, streaming services are unlikely to thrive if they are creating nothing morethan the next big hit.

We believe Netflix understands the difference between active and passive viewing better than any othercontent company. Except for its transition from DVD rentals to on-demand video streaming, we believe themost ambitious and important strategic move Netflix has made was into original content. In 2013, Netflixreleased House of Cards, the first of many original series in its vast library of original content. According toour estimates, original content accounts for roughly 25% of Netflix’s titles in the US today. In 2019 alone,Netflix produced more than one unique piece of content per day on average – 371 new TV shows andmovies, or more than all of the shows that the US TV industry released in 2005.

Are all of Netflix’s latest shows and films hits? No, as shown in the graph below, the content that Netflixproduces is ranked as “average”. In fact, according to IMDB, since 2013 the average score on its originalmovies has dropped roughly 20% to ~6.37/10.

Source: ARK InvestmentManagement LLC

Perhaps one reason for the drop in quality, Netflix has shifted its focus from movies to TV shows, as is alsoshown in the graph above. While movies often attract customers to its platform, TV shows help with theirretention. During the past ten years, Netflix has increased the number of TV shows on its platform, cut thenumber of movie titles, and in the process doubled the total number of content minutes available, asshown on the next page. As a result, 36% of all minutes available on Netflix are from original programming.

WHAT STREAMING SERVICES CAN LEARN FROM NETFLIX

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CONTINUED…

Source: ARK InvestmentManagement LLC

More important than the quantity of content streamed is the ability to match them with viewers. Again, noother service appears to compare to Netflix in concentrating viewership with the right shows. As shown inthe graph below, 16 of its top 20 content pieces, or 80%, have reached more than 35% of its user base. Forperspective, in 2019 only 15%, or 3 of the top 20 rated ‘telecasts’ to air on cable – all of them football games– reached more than 25% of US households. Only two of the twenty, or 10%, were scripted TV shows, therest either live sporting events or award shows.

Source: ARK InvestmentManagement LLC

What can we learn from the evolution of Netflix’s content strategy? First, quality content can attract newusers, but a robust library of content seems to be essential to retaining them. Second, content diversityincreases user engagement while a variety of genres, formats, and languages attracts new viewers. Finally,we believe quality content eventually gives way to quantity: most users will not binge three Martin Scorsesefilms, but they will consume an entire season of Tiger King. Consistently building and broadening its libraryof content, Netflix appears to have set itself apart from the competition, including linear TV.

CHARTS/MEMES OF THE MONTH

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AUGUST 2020

SOCIAL MEDIA NETWORKS RANKED BY MONTHLY ACTIVE USERS

RCI UNIT TRUSTS

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‘HAPPY TO TAKE SMALL AMOUNTS’

RCI BCI Worldwide Flex closed August at 174.15c, up 5.98% for the month and up 35.68% for the last 12

months. It is ranked 3rd out of 79 funds in its category for the last year, and 5th over a rolling three-year period.

RCI BCI Flexible Fund closed August at 324.01c, down 0.04% for the month and up 0.02% for the last 12 months.

Our unit trusts have the flexibility to buy and sell shares and to change weightings more frequently than in an

individual portfolio. We are happy to take small amounts into the unit trust (from R1000 per month, to lump

sums of up to R25 000). As you will not pay commission to any agents, there is no cost to get in and out of our

fund. When selling, the amount you receive back will depend on our performance.

Collective Investment Schemes in Securities (Unit trusts) are generally medium to long term investments. The value of participatory

interests (units) may go down as well as up, and past performance is not necessarily a guide to the future. Unit trusts are traded at

ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available

on request from the company/scheme. Commission and incentives may be paid and, if so, would be included in the overall costs. The

portfolio is registered under the license of Boutique Collective Investments, a member of the Association for Savings & Investment SA.

Forward pricing is used. More details are contained in a fact sheet that is available upon request.

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Headline CPI +4% RCI BCI WORLDWIDE FLEXIBLE (ZAR) RCI BCI WORLDWIDE FLEXIBLE (USD)

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TO CONCLUDE…

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AUGUST 2020

August saw markets continue their strong rise, with both emerging markets and developed markets rallying. The

disconnect between Wall Street and Main Street continues to widen as global equities moved further into the

black for the year, predominantly on the back of a “lower for longer” stance from the US Fed. The weaker US

dollar also helped slightly. The market is now entering into a rather “precarious” time of the year as we go into

US elections. We continue to recommend investors exercise caution, with US market trading at already

stretched valuations. Apple became the first ever US company to reach a $2trillion market capitalization!

In this newsletter, we insert a short story about why investors should be looking to “take a little off the table”.

Some of the growth counters have seen unreal returns in a very short space of time and, although still great

businesses, it is sometime better to play with the house’s money. A short story reminds us that nothing

continues forever, and we need to remain flexible with our investment thesis and look to take some profits and

restructure out portfolios every now and then, when markets become irrational.

We also include a short article to show that “Bull markets and bear markets come and go, and it’s more to do

with business cycles than presidents.” That said, interesting to see that the best stock market returns (+210%)

have come under Bill Clinton’s 8 years in office. A Democrat, for those of you concerned about a Biden victory.

Most of our client portfolios are very well positioned and have performed well ahead of benchmarks. Although

portfolios are up, we continue to exercise caution when investing clients’ hard-earned savings. Investors will

start to turn their attention to election promises in the US as November approaches. We continue to expect

positive news on the vaccine-front, and a wall of liquidity suggests that market could move higher, but nobody

ever went bankrupt taking some profits and restructuring their portfolio to something with a lower risk profile in

these uncertain times.

We are excited about what the future holds and continue to keep a close look out for companies on our

watchlist that should be able to generate our clients’ solid returns from current levels, over the medium to long

term.

We hope to continue assisting you, our clients, by being the best Family Office we can be.

Di, Mike & Eric

PS: Please feel free to pass this newsletter on to friends and family who may wish to learn more about investing. To be added to our mailing list, contact eric@rcinv.co.za

Note: We had an incident earlier this year in which a client’s email address was hacked and we were requested

to redeem an investment and pay funds to a new bank account. This is not the first time it has happened and

certainly will not be the last. Thanks to the processes we have in place we picked up the scam and the request

was not processed. It is our standard practice that whenever a client changes a bank account, apart from

requesting proof i.e. bank statement or letter from the bank, we always phone the client to confirm. In this case,

the requested proof of bank arrived (it was a doctored one!!) but on phoning the client, we discovered this to be

a scam.

To assist us in making sure this happens as little as possible we would encourage you to change your email

passwords regularly and if you are sent a password by a supplier, e.g. Mweb, that you must please change it

immediately.

RCI – “THE FAMILY WEALTH OFFICE”

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WHAT WE OFFER:

FINANCIAL NEEDS ANALYSIS OF YOUR FAMILY’S ENTIRE ASSET BASE

• Evaluate existing asset base and asset allocation

• Evaluation of current investment structures (retirement, endowment, company, trust etc.)

• Establishment of future goals/objectives/risk appetite

RECOMMENDATION OF CHANGES TO EXISTING ASSET BASE AND ASSET ALLOCATION

• Suggested restructuring (per proposal)

• Local/Offshore split

• Trusts; local and offshore

• Companies

• Insurance

• Estate Planning

• Calculating existing estate duty and capital gains tax

• Assisting in reducing estate duty and capital gains tax

• Reviewing trust deeds

• Reviewing existing wills

INVESTING CLIENT FUNDS

• Bespoke local/offshore share portfolios

• Retirement funds

• Unit trusts (local/offshore)

ONGOING FULL CASH MANAGEMENT SYSTEM

• Fully managed transactional banking accounts for clients

• Third party payment functionality – debit orders and ad-hoc payments

• Transferring of funds offshore

FIDUCIARY SERVICES

• Trustees on more than 80 trusts

• Trust administration

• Trust accounting

• Tax compliance

• Assisting in applying for foreign tax clearance

• Legal compliance; drafting of resolutions, contracts and assisting with legal opinions

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One of our clients would like to cordially invite you to her clothing store, Nunx and Natalia’s next open day.

Please feel free to contact her should you have any questions or visit her website for more details.