Published Date: 2019-06-13 | Source: INCE|Community | Author: Warren Ingram
I have been getting really angry about how the South African press is being used by media-savvy operators with suspect motives to play on our fears. They are destroying a valuable part of our democracy to further their own, selfish agendas and all South Africans will be worse off as a result. Sadly, the financial media is not immune from this infestation. Some people in the investment industry are salesmen posing as experts who have a clear agenda to stoke fear about the investment prospects of our country. These operators then offer hope in a carefully crafted message that aims to alleviate the fear. Most often the "hope" they offer is packaged in the form of products/services offered by these salesmen! Those who blindly follow "opinions" offered in the media are usually in for a rude financial shock later in life.
The Sunday Times "Rogue Unit" debacle has conclusively proved that we all need to be more critical when consuming media, including this opinion piece! Sometimes writers will provide an honest opinion with no covert agenda, but their views will still be influenced by their subconscious bias. In other cases, the writer has a clear agenda to drive their own business interests by appealing to your fear or greed. This can be called financial pornography and should be viewed in the same way as other forms of pornography i.e. not a reflection of reality.
OFFSHORE INVESTMENTS VS LOCAL INVESTMENTS
I believe it is irresponsible to recommend that all retired South Africans who plan to live in South Africa (and therefore spend in Rands) should invest all their money overseas.
South African investors should have a portion of their assets invested offshore. I believe the amount allocated offshore should be a function of your wealth, risk tolerance, spending objectives and views on the future of SA. People who have retired with just enough money in SA should consider allocating approximately 25% offshore while those who have enough to leave money to their children, could increase their allocation to 50%. Wealthy families could increase their allocation to 75% invested offshore. We need local assets to generate income to pay our local expenses and monthly expenses cannot be exposed to currency volatility where your income might drop by 10% in a quarter when the rand strengthens. This is especially critical when you have limited capital and therefore cannot simply draw more money if the rand strengthens.
It is important to realise that South Africa is not a basket case. This is not an irrational view based on false hope but rather one based on facts. To quote Adrian Gore, "The fact is SA, like the world, is a fundamentally better place as time progresses. Our GDP is 2.5 times the size it was in 1994 on a dollar basis; formal housing has increased by 131% from 1996 to 2016; new HIV infections have gone down 60% from 1999 to 2016, and the murder rate per 100,000 is down 50% from 1994 to 2017."
Sadly, I have seen articles by salesmen saying South Africans are naïve if they choose to invest their assets in SA. Some of these salesmen work for international financial advisory firms that cannot offer South African products to South African residents. (Can you see their agenda?)
There are others, writing similar articles, focusing on the recent poor performance of the JSE to justify their view that we should all invest offshore now. Just consider the logic behind this suggestion, these people are telling you to sell cheap assets (the JSE) so that you can convert your Rands into Dollars at a time when you will get very few Dollars for your Rands. Then they are telling you to invest in international shares at a time when the US stock market is expensive!
Other writers own offshore unit trusts and so you should question their motives when they write extremist articles designed to create fear about the future of SA and the investment prospects of our markets. They are hoping that if they can create enough fear in your mind, you might contact them to discuss offshore investing (to resolve your fears) and end up in their offshore unit trusts!
Here are some of my beliefs:
I am an SA Optimist. I believe that our strong civil society, an independent judiciary, free press, and independent Reserve Bank are key advantages. We can turn our economy around with the right leadership and the early signs are already there.
The JSE is not a reflection of the SA economy. More than 50% of the JSE has almost nothing to do with the SA economy e.g. companies like Richemont, BAT, BHP earn very little from SA in comparison to their total earnings.
I don't believe that market history repeats itself automatically. Whatever happened in the last five years is very unlikely to be repeated in the next five years. This is not rocket science, merely basic behavioural economics - people who tell you any differently are either ignorant or pursuing an agenda at your expense.
I urge you to read all financial articles with a critical eye, including this one! Be especially careful of articles that aim to stoke fear or greed, this is an age-old propaganda tool used by the unscrupulous at the expense of the rest of us. Any article that is totally one-sided should be ignored with contempt!
Warren Ingram is a Wealth Manager at Galileo Capital. Twitter: @warreningram