Let­ter from the Edi­tor

Finweek English Edition - - INSIDE -

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”.

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