The latest edition of Noseweek carries a story titled, “BUBBLE TROUBLE. A South African economic meltdown is imminent, warns the analyst who forecast the last global financial crisis”.
The problem with sensationalist journalism / predictions like this is that the story is usually a mixture of fact and gobblygook, which makes it sound fairly credible. They say that the best lies are 90% true.
The question I ask myself is why are we so pre-occupied with trying to predict the next crash, knowing full well that even if we could predict a crash was imminent, it is highly unlikely we would do anything about it for fear of being wrong and missing out on more of the great returns we have enjoyed over the recent past. Similarly if we were lucky enough to be sitting on a pile of cash after a market crash it is unlikely we would actually invest for fear of further downside and losing our money. We would most likely wait for confirmation of the recovery before committing our funds.
If you fancy yourself as an investor what you should be focusing on is the underlying market value and even here it is not clear cut. Most financial people will tell you today that the local market is expensive, however renowned value manager RECM asset management have recently increased their share exposure based on an “increase in valuation opportunities”. Likewise the well-known global value manager Orbis is finding opportunities in China, notwithstanding their rather negative view on the economic outlook for China, who are struggling to deal with a credit and property bubble threatening to burst.
Charlie Munger best known as Warren Buffets side-kick is quoted as saying, “The dawning of wisdom is when you realise you know nothing” or as I like to say, you get those who don’t know and then you get those who don’t know that they don’t know. You want to avoid the latter when picking a financial advisor / manager.
My advice is to find a trusted advisor to keep an eye on you and leave the portfolio management / stock picking to the professional asset managers.
Mcomm, CFP®, HdipTax
T. 021-851 3746