NAV­I­GAT­ING UN­CER­TAINTY

Finweek English Edition - - FEEDBACK - Read­ers’ views are edited and pub­lished at the dis­cre­tion of FIN­WEEK JANA MARAIS Views do not nec­es­sar­ily re­flect that of the pub­lisher.

EDITOR

WRITES: This time it’s dif­fer­ent.

Those are the four most dan­ger­ous words in in­vest­ing, ac­cord­ing to leg­endary in­vestor Sir John Tem­ple­ton, who died in 2008. But is Tem­ple­ton’s view still rel­e­vant?

Two re­cent ar­ti­cles give dif­fer­ing views on the mat­ter. Yes, says Jeremy Gran­tham, founder and chief in­vest­ment strate­gist of GMO, a Bos­ton-based in­vest­ment firm. Gran­tham, who pre­dicted the Ja­panese crash, the dot-com bub­ble and the global fi­nan­cial cri­sis, told the Fi­nan­cial Times the mar­kets are ready for a “ma­jor de­cline”, pre­dict­ing by late 2016 mar­kets will be “ex­tremely vul­ner­a­ble” to a crash, given the high val­u­a­tions. (He was, how­ever, also overly gloomy on the stock mar­ket in the late 1990s, call­ing bust way too early.)

On the other hand, Las­zlo Birinyi, a for­mer an­a­lyst at Salomon Broth­ers and pres­i­dent of Birinyi As­so­ci­ates Inc., be­lieves “this is not your grand­fa­ther’s mar­ket”, Bloomberg re­ported. To an­chor stock mar­ket pre­dic­tions on val­u­a­tion data that goes back a cen­tury or more may no longer be rel­e­vant.

Things have changed in a world dom­i­nated by in­sti­tu­tional in­vestors, hedge funds and ser­vice in­dus­tries, and sen­ti­ment is as likely to drive prices as any­thing else, Birinyi said. Re­serve Bank gover­nor Le­setja Kganyago also warned on 11 Au­gust that the global econ­omy is “en­ter­ing into new un­char­tered wa­ters”, given the nor­mal­i­sa­tion of mon­e­tary pol­icy in the US, where the Fed is ex­pected to start rais­ing in­ter­est rates in Septem­ber, and the slow­down in China, which has im­pacted com­mod­ity prices and prompted a de­val­u­a­tion of the yuan.

In this week’s cover story (see page 10), Ciaran Ryan shares lo­cal ex­perts’ views on the fac­tors af­fect­ing lo­cal and global mar­kets, and their ad­vice on where you should be in­vest­ing your money in the cur­rent en­vi­ron­ment. As Kganyago warns, it is time to pre­pare for tur­bu­lent times ahead.

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