Size Matters

With the latest moves of Mother Russia to secure itself additional holiday resorts on the Black Sea and the new denim clad Mr Putin marching with the old red army into South Ossetia, it is not surprising that it has caused many to stop, pause and consider just how fickle economic and financial assumptions can be. A rainy night in Georgia may just lead to storms elsewhere.

It may not be true that Marks and Spencer were about to expand across the whole ex soviet union as Marx and Engels, but many European and American companies do have billions invested and will be watching very carefully to see if the presumed stability they assumed, still exists.

Meanwhile back in South Africa we are having a little period of rediscovery ourselves, are we not? While Mr Zuma adopts multiple personalities, dependant on the company he is keeping, the rest of us wait and wonder just who the real Mr Zuma is and at what point he will stand up. Investment banking friends talk of him wowing them in London and New York but it is mildly disconcerting to see him sing and dance to order, outside his second home of late, the court house, and that grin is really irritating, Jacob.

Whilst I have always been a supporter of the simple right of any man to a free and fair trial and while I would actually (sorry I am a lawyer) prefer that 99 guilty men walk free rather than see one innocent man be convicted, it is rather annoying and disconcerting to hear us all threatened with a bullet if Mr Zuma’s supporters are not happy with his free and fair trial. Is that not hate speech and illegal?

But on to lighter topics and it is now time for the new soccer season and my beloved Everton will no doubt be trampling the likes of Man U, Chelsea, Arsenal and Liverpool into the dust!

Well actually probably not. It occurred to me that as a safe bet picking those four clubs to fill the top three positions has to be one of the smartest bets ever, I could just not bring myself to do it. Just like the larger, well funded, well managed and supported shares on the stock markets they are likely, over the medium to long term, to give you the safest and most reliable results.

The JSE has relatively few “liquid” stocks, those being the stocks you can enter and exit in any decent volume without affecting the price to your detriment. Personally, I think once out of the top 60 stocks you are taking a risk, possibly a calculated and depending on your circumstances an acceptable risk, but definitely a higher risk.

The simple analogy is Everton in the Premiership. We finished 5th out of 20 clubs in the Premiership last season and basically as such were top of “our league” that being the 16 clubs other than the big four!

Not a problem you may think, a small improvement and you are on the way to fourth. Not so, it is more likely that Nationwide will be named safest airline in Africa! Last season Everton played all four top clubs twice, home and away, that’s 8 games and 3 points for each game, or 24 points in total. Now remember we came 5th, so all the other clubs are generally worse than us, so how many of the 24 points to you think we got?

One, yes one point from a draw with Arsenal we lost the rest. Not that’s the gap and the same applies in the stock markets and not just here but globally!

Stay with a good advisor or find quality advice, remember to check they have an FSP (Financial Services Provider) number and ask to see the certificate from the FSB, last week I heard of someone claiming to have an FSP number but they were a fraud and could not produce a certificate and were definitely not on the FSB website (www.fsb.co.za). Ensure you are clear on your Needs Analysis and also your Risk Profile and if you are over fifty, look to secure your capital and income through a suitably constructed portfolio of investments.

Finally, I must admit that I just put ten quid on Everton to win the league, ten quid on us beating Liverpool twice and ten quid on us doing the double, but then that’s what we call our play money and I may as well have burnt it. Needless to say if I win all three bets I will buy you all a drink at the pub!

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