The devil you know...

In­vest like Gold­man Sachs

Finweek English Edition - - MONEY CLINIC - MARC ASH­TON marca@fin­

CON­SPIR­ACY THE­O­RISTS would sug­gest back­ing in­vest­ment bank­ing group Gold­man Sachs in any­thing is much like mak­ing a deal with the devil. How­ever, there’s no ques­tion it’s one of the most suc­cess­ful in­vest­ment teams of all time. For this rea­son alone it makes sense to at least con­sider five of its “Top trades for 2011” if you’re plan­ning to make money this year.

The pri­mary area of con­cern for the firm is con­tin­ued un­cer­tainty about the Eu­ro­zone, as well as some in­di­ca­tions that China may be over-heat­ing and the re­sponse to the so-called “QE2” stim­u­lus un­veiled in the United States.

Our core view is that these is­sues can best be de­scribed as ‘af­ter­shocks’ from the 2008/2009 cri­sis rather than the kin­dling for a fresh cri­sis. We wouldn’t be sur­prised if mar­kets have to deal with pe­ri­odic tur­bu­lence about those is­sues, but we don’t ex­pect them to de­rail un­der­ly­ing im­prove­ments.

Trades one and three are dif­fi­cult for South African in­vestors to em­u­late, as there are limited tools avail­able that al­low them to par­tic­i­pate in those mar­kets.

Its bullish view on US bank­ing groups in­di­cates the world’s largest econ­omy is com­ing out of re­ces­sion more quickly than peo­ple ex­pect and if you want to take a punt on spe­cific US bank­ing stocks most of SA’s stock­bro­kers now of­fer ac­cess to in­ter­na­tion­ally listed stocks.

For trade num­ber four, in­vestors could look at the Deutsche Bank X-tracker, which fol­lows the MSCI Ja­pan in­dex for ex­po­sure. But be aware that per­for­mance could be af­fected by the strength of the rand rel­a­tive to the US dol­lar. Those traders who’d like to be more ac­tive par­tic­i­pants but would like to elim­i­nate some of the cur­rency im­pact could look to trade in­dex spreads through the likes of Global Trader.

Trade num­ber five also needs to take into con­sid­er­a­tion the im­pact of the rand as com­modi­ties are priced in US dol­lars. A per­sis­tently strong rand will neg­a­tively im­pact in­vest­ment re­turns in a rand-based prod­uct.

Stan­dard Bank is ru­moured to be about to un­veil a com­mod­ity-based ex­change­traded note (ETN) that will give in­vestors ac­cess to a bas­ket of com­modi­ties. Al­ter­na­tively, there have been plat­inum and oil ETNs rolled out by Stan­dard Bank and Rand Mer­chant Bank over the past few months. Or in­vestors can par­tic­i­pate via the spreads mar­kets. How­ever, with spread trad­ing prod­ucts, traders and in­vestors must re­mem­ber mar­kets don’t move in a sin­gle di­rec­tion and there may be volatil­ity that can make for some hair­rais­ing mo­ments for highly-geared traders. Ex­er­cise due cau­tion if you do de­cide to fol­low the “vam­pire squid”.

Though Gold­man Sachs may be talk­ing its own book it’s hard to turn up your nose at po­ten­tial 20% to 28% in­vest­ment re­turns in the cur­rent cli­mate. As usual there’s a caveat: buyer be­ware.

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