UNLOCK YOUR VIRTUAL CFO!February 24, 2016
MARKETS ARE UNPREDICTABLE – COSTS ARE FOREVERMarch 23, 2016
English author Edward Bulwer-Lytton way back in 1839 for his play Richelieu: Or the Conspiracy about Cardinal Richelieu. first penned the line “the pen is mightier than the sword” in the passage:
“The pen is mightier than the sword. Behold
The arch-enchanters wand! — itself is nothing! —
But taking sorcery from the master-hand
To paralyse the Cesar’s, and to strike
The loud earth breathless!”
The immense power of the “Word”; spoken, tweeted, posted, written, implied or hash-tagged has dominated the start to 2016.
Society has been divisively shaken by vile rhetoric spewed from various electronic platforms and more traditional podiums. To a large extent this “trending” discourse has become intertwined and exacerbated by the economic uncertainty, falling Rand the student protests and devastating drought. All significant issues in their own right but as a collective they have set 2016 off on a difficult journey down a very bumpy road.
Author, Jodi Picoult’s once wrote: “Words are like eggs dropped from great heights; you can no more call them back than ignore the mess they leave when they fall” this sentiment resonates strongly across all spheres of 2016 society. Large Billboards call for individuals to Fall, mass student mobilisation calling for Fees to Fall and sparrowbrained offensive tweets call people animals!
Words can cause a great deal of pain and with society so immediate and connected, people are just a click away from spewing rhetoric without thought. But fortunately this instant connectivity also allows for, swift (and often venomous) condemnation and thought provoking perspectives from diverse sources.Sticks and stones may break my bones but words will never harm me….? WHAT NONSENSE
Words that caused economic pain!
The most poorly considered words of 2015 “I have decided to remove Mr Nhlanhla Nene as Minister of Finance, ahead of his deployment to another strategic position,” had a massive, and decidedly, negative impact on the perception The International Economic Community has of South Africa’s already shaky fiscal stability. The timing of these words, made soon after Rating Agencies WARNINGS and amid a trend of weakening Emerging Market Currencies against a strengthening US Dollar exacerbated the Rand’s sharp decline. The reinstated Minister Godhan has temporarily becalmed the storm and he will continue to be at great pains to present well chosen “words” to placate and shore up the battered confidence of International Ratings Agencies looming like a hangmen with the ominous Junk Status noose.
Our economic outlook has started, for many, to take on the look of the condemned and there are certainly difficult times ahead but they are by no means insurmountable. South Africans, and especially South African Businesses, have proven to be amazingly resolute in the face of adversity. South Africa does, however, need encouraging and well considered leadership from all sectors. We need realistic and concise “words” that guide, motivate and inspire. Just saying “we are not in a recession” is not enough there needs to be clear and rational policy to ensure the Bear is kept at bay and the Bull has fodder to graze.
Bulls and Bears
The common explanation for use of the term Bulls or Bears for describing a Market relate to the way the two animals fight (or show dominance) a Bull lowers its head before thrusting upwards with its horns – hence a market that has been low is now moving upwards. A Bear stands tall before coming down to attack or engage – hence a market that is coming off its highs and is now on a downward progression.
Hawks and Doves
Bulls and Bears are not the only animal analogies watched with increasing emphasis. Reserve Bankers and especially the mighty US Federal Reserve’s Chair, Janet Yellen, and the ECB Chair, Mario Draghi, are scrutinised on the tone of their delivery as much as the words and phrases used. Economists and market watches, worldwide, seek to identify the “dovish” or “hawkish” sentiment as a guide to, not only, the direction the Interest Rate Cycles are heading but also how aggressively this direction will be followed.
Investopedia describes a “dovish” tone as “the tone of language used to describe a situation and the associated implications for actions. For example, if the Federal Reserve Bank refers to inflation in a dovish tone, it is unlikely that they would take aggressive actions.
The more aggressive Hawk gives its characteristics to more decisive “hawkish” term, described by Investopedia as “An aggressive tone. For example, if the Federal Reserve uses hawkish language to describe the threat of inflation, one could reasonably expect stronger actions from the Fed.
Granny’s Sage Advice – Calm down with a cup of tea and a Zoo biscuit.
Looking out on 2016 with all the animal analogies and uncertainty, I can hear my dear old grandmother’s favorite comment, whenever confounded, and always accompanied by a puzzled expression – “It’s a zoo out there”! She would then make a pot of tea grab some trusted Zoo biscuits and put her feet up to contemplate things!
DO NOT PANIC:
With uncertainty and anxiety abounding; Economic statements, comments and “words” (regardless of their legitimacy or validity) are grasped like lifebuoys by unsettled investors. With a plethora of information at their fingertips, investors, are continually bombarded by
“words”, often sensationalized sometimes salient! These opinions and prophesies cannot be dismissed outright but should always be taken with a pinch of salt (tea and a zoo biscuit) and analyzed within the context of each individual investors personal Investment Plan and Strategy.
“Mixing investing with panic is like mixing alcohol with gunpowder.” Eugene Maree always warns! This maxim is extremely relevant for investors in 2016. The possibilities of downturns in markets are always a consideration in any Harbour Wealth investment strategy. Our clients’ individual plans and strategies are personally tailored to allow for “time in the markets” that ride out downturns when the clients’ needs allow for extended investment terms. However, clients with short term demands on their investments (or portions of their investments) have been accommodate in secure and stable portfolio blends to ensure that the funds are available when needed.
The most important “words” you need to refer to during times of market uncertainty are those of your Personal Harbour Investment Plan.
Harbour’s Investment Committee is collectively and daily engaging in regard to the many various factors that have the potential to influence markets both locally and internationally and should any of the underlying structures of the Harbour Models need to be amended – action will be taken! But only after serious consideration without emotion.
2016 is going to be a year that will be remembered and discussed for years to come!
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)