2014 is almost gone and things are beginning to look bleak. Power cuts, confidence levels down and crime seems to be once again at the forefront of everyone’s minds. Good thing that crime is once again being taken seriously, if we all take charge of our streets and get involved in fighting crime from the ground up. We can’t leave it to others as it starts with us!
Medical aids –
2015 option changes
You must decide on what plans you want to
change to (be this a down or an up- grade) by the end of November. That gives
you three weeks to let them know what your option for 2015 will be.
Please read through membership brochures that
should have been emailed to all of you.
Finance &
Markets
Back to finance and what has happened over the past two
quarters since my last email. It is quite interesting to see the figures change
since the last market shorts I sent back in March – see market shorts Q 3 2014 (below). The ALSI has done only 5 % (rounded) but
that belies the fact that it actually went all the way to above 52,000 points
and then pulled back. The biggest loser in all of this is Resources – the Resi
10 has fallen 15 % since March and has only annualised 14 % over 5 years. This
seems to fly in the face of what people are still calling a resource
Supercycle.
What about property? In 2008 property was the reason our
entire financial system ground to a halt. So what about returns - South African
Property index (SAPY) provided an annualised return of 19.8 % over 5 years.
So if you had known the Macro-economic environment prior to
2008 would you have moved your portfolio to take view into resources and away
from Property? You would have made a wrong decision.
This was a point raised by a speaker at conference I was at
recently where he stated that exact fact. If you knew the Macro-economics of a
particular period you would have still made the wrong calls on your portfolios.
Analysts get it wrong and so do the average investor. Moral of the story is
stick to a solid portfolio of diversified assets & asset classes. Grind
through the tough times that will always come around – things are cyclical in
case you didn’t know and stick to your goals. If you do this then short-term
fluctuations and the noise that accompanies this will be easy enough to filter
out.
Saying that, SA is definitely in for some tough times ahead.
Our new Finance Minister, Nhlanhla Nene, has made this quite clear. So we need
to prepare for this and accept this in our returns. This is cyclical and as
long as we start to see some direction from our government we may see through
this quickly. Unfortunately I am not that confident of this being a speedy
turnaround. There is still too much pain from Marikana for the government to
move to decisively in favour of pro-business resolutions. So it may once again
be the muddle-through approach that we adopt. Lets hope though, that our
government takes a stronger line on things it can influence quite speedily and
that is crime (including our justice system), education and health. If they can
get these three (four) right and make them effective, everything else will fall
into place.
Don’t hold your breath though and also keep an eye on
Europe. They are the black swan in the room and if things don’t sort themselves
out there, we will be even more affected. Europe is our largest trading partner
and if Germany doesn’t stick to some sort of QE type expansion, we may yet see
this continent undo their advances over the past few years.
With the US finally ending QE – see graph on my shorts page
– we may finally see some kind of idea as to what they are going to do with all
their assets. Only time will tell if this indebted nation will ever be able to
actually pay this debt back. At $ 58,603 or R 2.6 million per family of four US
citizens, this is a feat that will defy all logical outcomes (Source -
Bloomberg).
I must report on some African Bank (ABIL) exposure in the
Investec Opportunity Income fund. Some of my clients are invested in this fund
and it appears the worst affected. Please contact me if you have any concerns
or want to discuss this further.
Have an excellent festive season if I don’t see you before.
Christmas decorations are already up in the retailers so I can say that!
Regards,
Duncan
