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.