Letter from the Editor
JANA MARAIS, FINWEEK EDITOR, WRITES: How much steam is left in the JSE’s current bull run? And if it’s nearing its end, should we expect a correction or crash?
Liesl Peyper posed these questions to some of the country’s leading fund managers in this week’s cover story (page 16). With the JSE at record highs (again) and trading at very expensive levels, it is bound for a correction at some point. If only we could say when, and by how much! It could, of course, become even more expensive, as Cannon Asset Managers’ Andrew Nevell points out. So what to do? For one, the fund managers surveyed in our cover story have the following advice: don’t overpay for shares, keep an eye on interest rates and diversify your portfolio. Interest rates rising faster than expected will be the main risk to equity markets, the consensus seems to be. They also suggest a number of stocks that they see as attractive in the current market environment.
Stanley Druckenmiller, a hugely successful former hedge fund manager who was George Soros’s right-hand man when they made $1bn by shorting the pound, has no time for diversification (he believes that you should bet the ranch when you spot a good opportunity), but would agree with the point on interest rates. In a speech in January, he said one of the most important lessons he learnt is that it’s not earnings that move the overall market, but liquidity. Focusing on central banks and the movement of liquidity is therefore crucial for investment success.
The other crucial lesson is to “never, ever invest in the present. It doesn’t matter what a company’s earning, what they have earned. You have to visualise the situation 18 months from now.”
Simon Brown (page 45) probably has the best advice of all: yes, there will be “at least a correction, but the when is totally unknown to all. So ignore the doomsayers and focus on your strategy”.