Latest issue of Blue Chip
Blue Chip, Issue 94 - Feb/Mar/Apr 2025
The financial global bubble
The FPI has reached a significant milestone in its history: as of 31 December 2024, it has surpassed 5 000 CFP® professionals, reaching a total of 5 001. This achievement reflects the growing recognition of the CFP® certification as the benchmark for professional financial planning and advice in South Africa. Congratulations! In this edition of Blue Chip, we speak to Kirsty Scully, board chairperson of the FPI, who has been elected to serve as chairperson of the FPSB Council for 2025. The FPSB is the standards-setting body for the global financial planning profession. Its mission is to manage worldwide professional standards in the industry represented by the CFP® mark (page 18). We also speak to the winner of the 2024 FPI Harry Brews’ Award, Bruce Whitfield, who hosted The Money Show on 702 and CapeTalk for more than 20 years (page 48). On page 24, we ask the question: are we in an AI bubble? Bubbles are a commonly referenced phenomenon in today’s financial markets; however, the term has been around since the early 18th century. We can look back at history and easily pick out well-known bubbles like the “Dot-Com Bubble”, but it is significantly more difficult to consider markets today and ask yourself “Is this a bubble?” This question is only clear in hindsight as the causes of bubbles tend to differ in each instance. In the technology bubble of the late 1990s, investors justified investing at never-beforeseen valuations of businesses, because they believed that the Internet was the harbinger of a new world, and therefore businesses could not be valued on traditional “old economy” metrics. This meant that what were known as “new economy” or “dot-com” businesses were being valued on their revenue growth rather than their profit growth. Investors were valuing businesses that had never made a profit at outrageous levels. In March 2000, the technology bubble burst. It seems that to grow real value, at some point businesses need to make money. This is not to say that nobody made money during the technology bubble. During any bubble, usually the early investors make money, if they get out before the bubble bursts. Investors are prone to poor decision-making when markets fall. Rob Macdonald, Head of Strategic Advisory Services, Fundhouse, explains what drives this poor decision-making process (page 52). For those looking to invest in American companies, before concluding that the US market is just too expensive, please read our article on page 44. The 2024 election results in South Africa were met with widespread optimism and showcased South Africa’s robust and innovative electoral and legal system. However, we should also view the 2024 Trump victory in the US as a red flag. The South African electorate seems smarter than its American counterpart in that for the most part, it rejected radical populism in the May 2024 elections. Trump’s populist approach threatens to weaken liberal democracy in the country. While South Africa has its fair share of political, socioeconomic and environmental challenges, the democratic fabric of the nation is not threatened in the same way. On page 46, read why the South African electoral system has proved resilient and innovative in a way the US system seems incapable of.