When will it be over?

Maybe next year… maybe in 60 years’ time

Finweek English Edition - - Creating Wealth -

SO MUCH is be­ing writ­ten and said by var­i­ous ex­perts about the global fi­nan­cial credit cri­sis that it’s a topic I cer­tainly don’t want to touch on. Ex­cept for one ques­tion I’ve been seek­ing an an­swer for: When will it all be over? So I asked some in­vest­ment pro­fes­sion­als, all peo­ple who’ve been around a while, and got an ar­ray of an­swers. I don’t know if they all an­swer the ques­tion, but they’re an in­sight­ful col­lec­tion of orig­i­nal views.

“We don’t know” is the re­sponse from Daniël Kriel, CEO of San­lam Pri­vate In­vest­ments (SPI). Well, that’s a frank an­swer. And I’m sure it’s the most hon­est thing you can say to a wealthy pri­vate client who, against your rea­soned ad­vice, wants to sell his en­tire eq­uity port­fo­lio de­spite it hav­ing lost a third of its value.

But Kriel isn’t that gloomy about the world­wide cri­sis. He even chuck­les as he tells how his di­rec­tor of in­vest­ments, Al­wyn van der Merwe, de­scribes the SA mar­ket as “be­ing priced for Dooms­day”.

“We don’t share the bear­ish view – we’re still cau­tiously op­ti­mistic,” Kriel says. “You have to be care­ful not to be sucked in by the noise. At the worst you get back to ba­sics.”

SPI be­lieves the un­cer­tainty and ex­treme mar­ket volatil­ity re­cently seen will pre­vail and is manag­ing clients’ port­fo­lios ac­cord­ingly. The bot­tom line is they be­lieve there are op­por­tu­ni­ties for long-term in­vestors.

Lis­ton Mein­t­jes, vet­eran in­vest­ment man­ager and chief in­vest­ment of­fi­cer at Lion of Africa, ap­proaches the ques­tion from an en­tirely dif­fer­ent an­gle. “A long time – maybe 60 years,” he replies. Then he laughs: “Now you can call me Mr Sixty Years.”

But Mein­t­jes clar­i­fies his re­sponse as the time the “hu­man ef­fect” will last, not the bear mar­ket (we hope). He re­lates how he had rel­a­tives who went through the 1929 mar­ket crash and sub­se­quent de­pres­sion. “They lost their once-thriv­ing busi­ness and had to move to a smaller house. I don’t think they ever quite got over it.”

But he does point out full mar­ket re­cov­ery could take some time. “Go back to the crash of 1969 in SA. It took un­til 1978 to get back, in real terms, prob­a­bly un­til 1980. And when the Dow Jones col­lapsed in 1966 it took un­til 1982 to come back.”

What Mein­t­jes can’t un­der­stand is why more peo­ple didn’t see this com­ing ear­lier.

Piet Viljoen, ex­ec­u­tive chair­man of as­set man­ager RE:CM, says his clients fre­quently ask: “Are we at the bot­tom yet?” And he has to an­swer that he just doesn’t know. “A key dif­fer­ence, though, is that we know we don’t know. In fact, we think that’s one of our very strong com­pet­i­tive ad­van­tages.” But what he’s done is col­lect ex­pe­ri­ences of what the bot­tom of a mar­ket is like from him­self and his an­a­lysts and posted them on the firm’s web­site (www.recm.co.za). Viljoen iden­ti­fies eight signs that the bot­tom might be near, but most telling as be­havioural psy­chol­ogy is prob­a­bly this one: “Lis­ten to your friends at the braai on Satur­day night – when they be­come dis­gusted with stocks, you’ll know the bot­tom is near.”

Un­for­tu­nately, Viljoen be­lieves we’re still a long way from such pub­lic ap­a­thy, par­tic­u­larly as vol­umes on the JSE re­main high. But it’s a good ex­cuse to braai...

SHAUN HAR­RIS shaunh@fin­week.co.za

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