Again the rand has been the greatest determining factor for share prices on the JSE Securities Exchange. After appreciating considerably to the R6/dollar level, it has weakened to and stabilised at approximately R6,30, still a gain of about 6% to the US dollar in 2004. This indicates with no surprise that the overall market has been flat for the year to date. Globally markets have reflected little to no volatility over the last 7 months, and are technically looking weak.

Monitoring the world's largest market we see that:

• The Dow Jones Industrial Index has slipped 3% for the year; and

• The S&P500 is flat, while the Nasdaq index is down about 5%

Bruce Johnstone from the large US mutual fund company, Fidelity, illustrated his concerns regarding the US market by analyzing 3 foundational support structures to equity prices. In his view the 3 foundations are:

• Rising corporate earnings;

• Benign inflation and interest rates with ample liquidity;

• Reasonable valuations.

He expressed reasonable confidence regarding the first 2 supports even though inflationary pressure is increasing. His greatest concern however is that current valuations are still not reasonable. One of the support structures is therefore unstable.

On the local market the smarter money appears to be doing the following:

• Investing and still holding local selected large cap industrial and financial shares likely to continue to benefit from consumer spending and the lower interest rates.

• Investing in selected resource shares that have fallen drastically on the back of the stronger rand.

• Reducing exposure to selected consumer orientated shares, following their substantial re-rating.

It is imperative to make sure that the best managers handle your funds, - not those merely replicating the composition of indices. Some managers have the ability to be consistent in seeking out good value. The prerequisite is that the best investment advice is offered to you regards your overall position. I strongly believe that the best investment managers are those that manage their own funds on the same basis as for clients.

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If you are a high net worth investor serious about financial success and determined to reduce worry and finance related stress consider the option of appointing a trusted advisor to help you achieve your financial goals and optimize your investment planning. Have a look at www.exsequor.co.za

For a copy of my Investment and Business Beliefs document, which defines 10 of my most important thoughts on investing email me at ian@exsequor.co.za

Posted: 2004/08/05 12:18 View Archive

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