Grab a tsunami surfboard

CASH IS KING SO SELL JSE STAKES There is a tsunami coming. Let’s not mince our words. That means you better be prepared before the water rises.

In the wake of the credit downgrades by S&P Global Ratings and Fitch, I scoured the media for any practical advice for the man in the street on what to do with his investments. While there were reams written on the downgrade and its impact, I found very little of use. By and large the advice tended to be “don’t panic” and “stay true to your investment plan”. That’s like saying “hold on to your umbrella” as a tsunami approaches. For this is a massive financial tsunami bearing down on us. Let’s not beat about the bush.

We are facing a five- to ten-year recessionary period of no or low growth. Chances are also very good, when Moody’s delivers its next rating, markets will react violently, more than they have so far.

The investment industry in SA has a historical bias towards equity-based investments and an aversion to cash. The reason is not hard to find – equity-linked fees are substantially higher.

But returns on cash over the past one, two and even three years now have matched and beaten the returns of the JSE All Share Index. I cannot see the returns of the JSE beating cash. We have a stock market heavily geared towards rand weakness.

I shudder to think what all those DIYand index-tracking investors are doing right now with their investments. Hell, I need a good investment advisor in these turbulent times, and I do this for a living! 1. Sell all nonincome producing assets such as leisure properties/beach houses/caravan/boats/quad bikes. Convert it into cash or reduce your debt.

2. If your buy-to-let are not yielding 6% plus: sell immediately. With bond rates going up, property prices will decline. Remember: I see a five- to ten-year trend.

3. I would move all my Regulation 28 investment portfolios 75% into cash and 25% into offshore equity-based asset swaps. This would include pension/provident funds/retirement annuities and preservation funds.

4. Living annuities must be a combination of cash or offshore investments.

5. Share portfolios should have the maximum geared towards offshore investments, like Google, Tesla, Facebook and Apple.

6. If you’re buying property, buy it in the Western Cape. The WC is the beneficiary of a massive demographic shift to the Cape, sustaining prices.

7. Cash available for more than five years should go offshore. Use your annual travel allowance or apply for the foreign investment allowance of up to R10 million per year, per individual.

8. If you’re wary of offshore valuations, opt for a structured product that offers you 100% guarantee of capital. Investec has just launched another.

9. Hold on to your job and postpone your retirement for as long as you can.

10. Take up mountain biking or any other sport that reduces stress. It has saved my life.

Magnus Heystek (magnus@heystek. co.za) is investment strategist at Brenthurst Wealth