Dear Fellow Investors and Friends

I’m Piet Viljoen, and today is January 11, the 11th day of the year. You have 355 days left to achieve those New Year’s resolutions (yes, there’s an extra day this year). Use your time well.

On this day in 1973, the Dow Jones Industrial Average peaked at a then-record high of 1051.70. It would not close above that level again for almost a decade – 3,583 days, to be exact. (Ned Davis Research;

Just a regular reminder that markets don’t always go up.

Also, on this day 120 years ago, Snaar Viljoen, (no relation of mine) and one of South Africa’s great sporting all-rounders, was born. I would not be surprised if you’ve never heard of him! Johannes Hendrickus ‘Snaar’ Viljoen was born in Hanover, Northern Cape on 11 January 1904. Snaar won a gold medal in the high jump and a bronze medal in the long jump at the 1930 British Empire Games held in Hamilton, Canada. He also placed fourth in the 120-yard hurdles event. Snaar also competed in the 220-yard and 440-yard hurdles and the hammer throw events. He also competed in decathlon events.

The decathlon is a track and field event comprising ten different disciplines – 100 metres sprint, long jump, shot put, high jump, 400 metres, 110 metres hurdles, discus, pole vault, javelin and 1,500 metres. You have to be a true all-rounder to participate in a decathlon. In 2023, I decided to embark on my own personal journey towards a type of decathlon, but more about that later.

This week, I am changing the format a bit (and temporarily) – no highs or lows or did-you-knows. Instead, I spend most of the letter reviewing 2023.

It’s always a useful discipline to compile an annual review of your progress over the previous year, both on a personal as well as a professional level.


I will spare you too much detail about my personal life except to say:

  • I’m tremendously proud of my son, who has achieved escape velocity on his life journey and is now just about fully off the (my!) payroll. It’s not easy for young men in South Africa at present, but he is making a good fist of it. Moreover, he wants to stay in South Africa as he sees an opportunity in all the chaos. Hats off to him.
  • Both my stepsons graduated well, one with an honours degree and the other with a post-graduate diploma in accounting (IYKYK). I am equally proud of them.
  • I read nine books this year. It doesn’t sound like much, but I got out of the habit of reading over the past few years, and at the start of 2023, I re-committed myself to reading more. As my teacher would say – Piet tries hard but can do better. And I intend to do so in 2024.
  • As this letter attests – I started writing again. Just like reading books, writing sharpens one’s thinking, and, under the influence of the crack cocaine of social media, I had also become undisciplined in this area. In 2023, I started working much harder on my writing skills.
  • In January, I started lifting weights three times a week. Heavy weights, or at least heavy for me. At the start of the year, I set a goal of being able to bench press my body weight and do ten pull-ups. I still can’t do that, but I am a lot closer than I was a year ago! Maybe this year?


As for my professional life, 2023 was a busy year.

  • I am now back full-time with my partner Jan van Niekerk at the RECM group of companies, after having spent four years helping to successfully bed down the three-way merger of the institutional asset management businesses of RECM, Counterpoint, and Bridge. Under the leadership of Paul Stewart, Merchant West Investments has now built a strong platform and is ready to grow. RECM remains a significant shareholder in the enlarged business, and I will continue to play a supporting role. Specifically, I will no longer manage the Global Value Fund, as my good friend and wonderful investor, Sean Peché of Ranmore Fund Management in London, will run this fund.  I am certain he will do a much better job than me. As an added benefit, the cost structure of the fund will decline as well. My colleague at Merchant West, Brian Pyle, will take over primary responsibility for the Merchant West SA Value Fund. I will remain as co-manager. I have been working with Brian for three years now, and in this time, he has added tremendous value to the investment process. I look forward to our journey together in the SA value space.
  • This leaves me with the opportunity to devote my time to the management of the Merchant West Worldwide Flexible Fund – or the cockroach, as I call it. Why cockroach? Well, cockroaches are said to be the only living things able to survive a nuclear blast. And that is my goal with the fund – to enable my clients to preserve the real value of their capital, in hard currency terms, regardless of the economic environment. You will never see excuses like “the economy was weak”, “the currency tanked”, “interest rates went up” (or down), “the politicians screwed us” or any other weasel words trying to explain poor performance. If the performance is poor, it will be my fault for making poor choices. And I will continue to do my best to make more good choices than bad.
  • The RECM group continues to go from strength to strength. We have an interest in several financial service businesses. As a shareholder, we support the management teams of these businesses with strategy, recruitment and general business advice, but are not involved in the day-to-day operations of the businesses. Apart from Merchant West Investments, we are also shareholders in the financial advisory firm Wells Faber and corporate advisory firm Questco and the management company of Desert Lion Capital. If you need personal financial advice, give Wells Faber a call. Tell them I sent you. You won’t be disappointed. As for Questco, amongst other advisory commitments, they advised RBPlat last year during the takeover battle between Impala and Northam. Ask RBPlat shareholders whether they think Questco helped them get a good deal. And then, if you need corporate advice, give Questco a call.
  • As for Desert Lion Capital a US-domiciled fund that invests in South African equities, one day, South African investments will come back into favour in the USA, and this fund will fly.
  • The RECM group also manages the portfolios of two listed investment companies, where we partner with a number of private businesses. All of which we are very proud to be associated with. You can read more about them in the annual reports of RAC and Astoria.
  • Jan manages the RECM Flexible Value Prescient QI hedge fund, and has generated a very good track record over time, compounding at over 25% p.a. for the past three years. It’s an honour to work with a smart guy like Jan.
  • I advise the RECM Foundation while managing the portfolio of its investment company, Beagle. Beagle has compounded its NAV per share at a rate of 26,4% p.a. since its inception 13 years ago. The Foundation has benefitted tremendously from this. During the course of 2023, the independent trustees – with some help from my wife, Amanda – have set up a sustainable programme of giving into the Early Childhood Development sector. In the many, many areas where our country’s hapless government falls short of any reasonable expectations, education is one of the most important. I am thankful to the trustees of the Foundation and proud of its contribution to educating the youngest and most vulnerable in South Africa.

Finally, in moving back to RECM on a permanent basis, I no longer have to drive to Claremont every day. I am now able to cycle to work in Bree Street. And I do – rain, wind (of which we have a lot here in Cape Town), or shine. At the ripe old age of 61, I have finally achieved commuting nirvana!

This brings me to where the rubber hits the road – investment performance for 2023. Each of these strategies will publish its own comprehensive report in due course, but for the moment, here is a summary of how the strategies I have an interest in fared in 2023:

  • Merchant West SCI Value Fund: this fund returned a disappointing 2,5%. In short, I owned – at least for a while – some of the big losers like Sibanye-Stillwater, Sasol and Multichoice. All of them were sold before the really big declines, but they still hurt returns. To make it worse, I didn’t own any of the big winners like Bytes, Textainer and Sanlam. In my defence, markets in 2023 favoured growth over value. But 2,5% is just not good enough. Fortunately, one bad year is not enough to spoil what remains an outstanding long-term track record. And I have no doubt that Value will come into favour once again, as it did in 2021/22. When it does, this fund will, once more, fly. A reminder that this fund is a pure South African investor – no offshore exposure.
  • The cockroach returned a respectable 5,6% in US$, more than inflation in the US. It also beat SA inflation in rand terms, and importantly, it has done so ever since the investment process was changed in August 2020.  Even more importantly, it has done so with super-low volatility. Over three years, the US number is still slightly behind inflation. But, in both ZAR and US$ terms, the fund is well ahead of the competition over this period. Finally, over five years, the numbers look bad both in ZAR and US$ terms. That is exactly why I changed the investment process. Overall, I am very happy with how this fund is doing since I made the process changes, especially bearing in mind it is a “stay rich” fund, not a “get rich” fund.
  • The Global Value Fund also had a tough year against a backdrop where the magnificent seven (you know, Nvidia, Microsoft, Meta et al.) stocks shot the lights out – and I didn’t own them. The rest of the market – a lot of which I did own – basically went sideways. Over the past three years, in other words, since value stocks started turning up, the fund is still ahead of both the competition (just) and the benchmark (comfortably). As Ranmore will be taking over the management of the fund, this will be the last time I will report on it.
  • The RECM Hedge Fund had a good year and the track record over three years is stellar. This is all Jan’s doing; I am an innocent bystander here.
  • Beagle continues to do well. It invests only in B-BBEE shares, which tend to be illiquid and massively undervalued, as there are always more sellers than buyers. This provides rich pickings for an investor like Beagle, who is allowed to fish in this particular pond where very few others are.

Overall, I let the team down on the value funds, both locally and globally. I am overjoyed with the returns generated by the other strategies. So, it’s a bit of a mixed-year investment performance-wise. As the teacher said – Piet tried hard but can do better!

What I’m reading

Seeing as this letter is mainly about reviewing 2023, I’d like to share two things with you. One is a review of the year by David Collum, a professor of Chemistry and Biology at Cornell University, and the second is a (short) review of the books I read this year.

  • Here is David Collum’s review of 2023. But be warned: it is a lengthy read, and large parts of it can be construed as conspiracy theory writ large. However, it is always useful to entertain unusual points of view – you never know what you may stumble on. And – some theories that were once regarded as a conspiracy have actually turned out to be true. Not many, but some.
  • During the course of the year, as mentioned, I read nine books. Some fiction, specifically illustrating my predilection for the sci-fi genre, but mostly non-fiction, leaning towards history. Understanding history allows one to zoom out and see the bigger picture – and realise that the more things change, the more they stay the same. Anyway, here goes:
    • “The Fifth Science” by Exurbia is an imaginative collection of 12 short stories telling a fantastical tongue-in-cheek tale about a journey into the future. It really gets the brain going, imagining the ramifications of all the possibilities these stories suggest. I enjoyed this one.
    • “The Three-body Problem” by Cixin Liu. This is a famous sci-fi novel. I don’t know why. I got confused by the Chinese names of people and places and lost track of what was going on. I couldn’t finish it.
    • “Blood Meridian” by Cormac McCarthy. This is not science fiction! In fact, it is, in true Cormac McCarthy style, a gritty “cowboy” story. I enjoy his flowing, descriptive style of writing, with minimal punctuation and maximal impact. Loved it.
    • “Collapse” by Jared Diamond. If you liked Guns, Germs and Steel (which I did) …you won’t like this. I found it too long-winded and repetitive. It makes some good points and draws some interesting conclusions, but he could have done it in half the pages. Didn’t finish it.
    • “The Square and the Tower” by Niall Ferguson. With the tower representing hierarchical power and the Square representing network power or the wisdom of the crowds, Ferguson describes how these power structures have interacted throughout human history. It was fascinating to experience one of the world’s most renowned historians describe power struggles that defined major turning points in human history.
    • “The Great Depression, A Diary, by Benjamin Roth” This book is essentially an annotated diary, written in real-time during the great depression of the thirties in the USA. There are lots of useful lessons here, not least of which was the security provided by owning real assets during financial dislocations.
    • “The Lessons of History” by Will and Ariel Durant. I don’t know – have I read this book 5 or 6 times? In any case, I reread it again last year. I will probably reread it this year; it is that good. In only 102 pages, the Durants have produced a Tour de Force of learnings based on history. For instance, “Nothing is clearer in history than the adoption by successful rebels of the methods they were accustomed to condemn in the forces they deposed.” That describes South Africa to a T today.
    • “Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War” by Roger Lowenstein was eye-opening in more ways than one. First, the war was – at least initially – not about slavery but about a great centralist (Lincoln and the Republican party) against the democrats of the South who wanted power to be devolved down to the individual states. It also showed that the victory in war goes to the side that has better access to financial resources. The Confederates were winning most battles right up until close to the end of the war but eventually ran out of resources – financial and otherwise. This ultimately forced their capitulation. The American Civil War also introduced Personal Income taxes for the first time, as well as the “Greenback”, a gold-backed currency issued by the Union government, which replaced a multitude of banknotes issued by individual banks.

“Outlive: The Science and Art of Longevity” by Peter Attia. Of all the books I read last year, this one made the biggest impression on me. The bottom line is that one not only wants to live long, but you also want to live long with as high a quality of life as possible. Attia coined the term “the centenarian decathlon”, which lists ten activities you should be able to do in your last decade of life. This includes being able to carry two shopping bags up a flight of stairs, pick up your grandchild, put your hand luggage in the overhead bin on an aeroplane, etc. Those sound like simple exercises, but to do them in your 90s requires you to be in the top 5 or 10% of your age cohort today. To do so, you need two things – an above-average VO2 max (i.e. you need to be fit) and above-average grip strength (i.e. you need to be strong). And you need to start now. I started last year, and I plan to work even harder this year. Like my namesake Snaar Viljoen, I want to be an all-rounder and compete in the Centenarian Decathlon.

What I’m listening to

As you might or might not know, I listen to a lot of music. New music, old music, good music and bad music. Well, not that much bad music unless you ask my wife, who thinks everything I listen to is noise.  And I am a big advocate of listening to an artist’s whole album in the order they intended you to do so. Just like an author wants you to start at chapter one and work your way through their book, musicians also want you to listen to the album in the order the put it together.

Anyway, here is a list of my top 10 albums for 2023:

On Apple Music

And Spotify

And here is a list of my top 20 songs for the year.

On Apple Music

And on Spotify

It starts off with a few bangers by Margo Price and boygenius, then drifts into some more poppy territory. Songs by Louise Post (a new discovery for me), IAN SWEET, Youth Lagoon (another new one for me), Portugal, the Man and also Stolen Jars (another new one!) cover the pop side of things. Then Anton L’Amour makes Afrikaans great again before Nick Cave covers T-Rex accompanied by Warren Ellis shredding his violin. Jason Isbell belts out another great story from Middle America before a left turn into slightly more difficult listening. If you survive the sequence of Blake Mills poking and prodding in uncomfortable places, Deer Tick scratching at a raw wound, Yo La Tengo’s masterpiece of noise rock and The National’s best song in a long time, then Lana del Ray starts bringing it back up again. Then some bluesy tunes by Sunny War and Fantastic Negrito follow, and it finishes with an 80-year-old Mick Jagger and Lady Gaga belting out a great Stones anthem. Dare I say – it’s almost as good as Sympathy for the Devil.

And finally, here is a long list (119 to be exact) of good songs that came out last year – maybe you’ll discover something new in there that you like. Unfortunately, I only have it on Apple Music.

I hope you enjoy these playlists.

What I’m watching

I have long been an admirer of Sakeliga. For those who don’t know, Sakeliga’s goal is to solve state failure at scale through litigation or by creating alternative structures. They want to help businesses “state-proof” themselves. This process is not dependent on the next election, whatever the outcome. In the video below, the CEO, Piet le Roux, and executive director, Russ Lamberti, are interviewed by Roman Cabanac.

The bottom line is that they advocate for less complaining and social postings and more dominion-taking and winning. I support them fully. In the interview, they address issues like B-BBEE, the 2024 elections, and MAN, or maximum achievable non-compliance.

You can find out more about Sakeliga here.

Finally I would like to share my goals for the year:

  • Healthwise – this is the year I want to achieve 10 pull-ups and bench press my body weight. A sub-3 CTCT (IYKYK) would also be nice.
  • Brainwise – I think a target of 15 books is not unreasonable. That implies even less social media than last year. As for writing – I started this letter 4 months ago, and there are now over 600 subscribers. I would like to get that up to 2000 this year. With a consistent weekly output, that should be achievable.
  • Workwise – I want to raise the profile of the cockroach. This fund can play an important role in many people’s investment allocation, and I aim to highlight this. The Value fund is also close to my heart, as I think markets are setting up for a strong and extended value cycle over the next decade. The past three years have simply been an appetiser. Finally, I think there needs to be more consolidation in the asset management industry in South Africa, and I would like to help Merchant West Investments play a role here.

That’s it for this week – thank you for staying the course through what turned out to be quite a long letter.

Have a great 2024, and remember – be very careful out there.

Piet Viljoen