Investment Newsletter (and related info)
June 2008
Negative mood creates buying opportunity
Buying high-quality assets at low prices is the route to wealth creation.
It is April 2008 and investors are nervous. And rightly so. The world is awash with bad news.
The financial/liquidity crisis
The global financial system is under threat due to the injudicious lending practices of greedy bankers exposed when the property bubble finally popped. As a result, banks are being forced to write off billions of dollars in bad debts. Many once big and powerful firms such as UBS and Citigroup, to name but two, face the task of rebuilding their balance sheets while Bear Stearns has had to suffer the ultimate price of being taken over by JP Morgan to save it from bankruptcy. Liquidity has dried up resulting in very few new loans being granted. As a consequence, economic activity is slowing down.
Recession fears in the US and slowdown in Europe and Japan The slowdown in lending and loss of confidence in the US is propelling the world’s leading economy towards recession. In Europe and Japan the ‘R’ word is not yet in use, but both regions are also facing at least a slowdown in economic growth.
Inflation on the march
Surging energy and food prices is a global phenomenon which is causing sharply higher inflation in many countries across the globe. Central bankers are presented with the dilemma of fighting inflation in the face of slowing economic growth. An unenviable task as the tightening of monetary policy to curb inflation will further depress economic growth and jobs.
Domestic concerns around politics and the Eskom debacle
Already rattled by global concerns, the ANC conference at Polokwane and the power outages caused by Eskom’s poor planning and execution of its duties have greatly impacted the JSE.
Investors are human and cannot help but be influenced by the news of the day. The abundance of bad news has therefore resulted in many investors liquidating positions.
In South Africa we have seen huge selling of equities by foreigners in the first quarter of 2008. The rand has consequently depreciated sharply as the money has flown to ‘safer’ harbours. Courtesy: Coronation Fund Managers
Read the full article here .
Financials offer good value compared to resources
“Investors have been surprised by the FTSE/JSE All Share Index’s strong rally of 24,9% since the market’s low on 23 January 2008. What is even more surprising is the large difference in the improvement of the major sub-indices. Resources companies have rallied by an incredible 44,8% on the back of only a few shares, followed by industrial companies with 18,6% and financial companies with only 9,4%.” Read Prieur du Plessis full article here .
Invest in a single transaction @ lower costs in Satrix FINI. This Exchange Traded Fund gives you the price performance and dividend yield of the FTSE/JSE Financial 15 index.
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Online Last Will and Testament.
Why a Will is needed:
- To avoid the application of the laws pertaining intestate succession.
- To allow the testator/testatrix to choose his/her heirs.
- To prescribe the conditions upon which an asset is to be inherited.
- To appoint Executors and Trustees who are responsible for the smooth and sufficient transfer and administration of assets on the death of the testator/testatrix.
- To apply safeguards to protect an heir’s inheritance.
- To avoid lengthy delays in the administration of an estate and the transfer of assets.
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Switching of Retirement Annuities (RA’s)
“In most cases, RA investors have wanted to transfer their funds because of poor performance, much of which is a result of the high costs of the traditional life assurance RA products, and/or the confiscatory penalties of up to 30 percent that apply if you reduce or stop paying contributions.
Last year, legislation was changed and it is now compulsory for RA funds to allow members to transfer to another RA fund. However, the new legislation does not make allowance for the high fees that can be charged. The life assurance companies are also allowed to charge early-termination penalties of up to 30 percent if you cancel your RA.” - Writes Bruce Cameron.
Consult your Financial Adviser to determine what the penalties will on your existing RA’s before considering moving your RA’s to value for money, new generation products. In most cases newer RA’s will carry high penalties. Older RA’s, nearing maturity, might be cost effective to move to the new generation products.
Bond Life Insurance (Home Loan Protection)
Home Loan Life Insurance, sometimes also called “bond insurance or bond cover” is designed to cover any outstanding balance on your Home Loan in the event of death, disability or illness.
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BondAbility Bond Insurance is underwritten by: Nedgroup Assurance Company Limited, a joint venture between Old Mutual SA Limited and Nedbank Limited.
Apply here :
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