Might does not make right, it makes reality.

The above expression sums up many of the ruling classes of Southern African countries. It most certainly applies to the ANC party which controls South Africa, and also until two months ago to Mugabe who controlled Zimbabwe.

I have always had an interest in this part of the world, and some twenty years ago I owned a factory near Durban. It manufactured pine furniture, which we shipped back to the U.K. and then into our main furniture sales and distribution system.

At about the same time I almost became involved in setting up a saw mill and processing plant in Zimbabwe to supply timber to the furniture plant in Durban. It was an attractive proposition and the Shona race, the largest population in the country, was educated, friendly and not averse to hard work. Fortunately, as it turned out, we did not go ahead with the project because it was obvious the direction the country was heading under the rule of Mugabe.

As a result of these projects, my wife and I have many friends in South Africa and most years we will visit there on holiday. In recent years it has become more and more obvious that the “Zimbos” have been moving to S.A. to find work, and then repatriate money back home to keep the wolf away from the family door. Their work ethic and attitude makes them stand out amongst the rest of the S.African working population, and they have ended up with the better jobs.

This now brings me to the point of this article. Mugabe has gone, and it looks as if his successor Mr Emmerson Mnangagwa may be about to try to turn the clock back towards the time when Zimbabwe was the bread-basket of Southern Africa and it’s people were well educated and gainfully employed. That is a big ask, but any recognisable step in that direction will likely result in the return of the Zimbabweans to their home country. Achieve that and Zimbabwe, rich in agriculture and natural assets, will bloom again – but this time on a more equitable racial footing.

Another major problem in investing into these areas has been the disappearing value of their currencies. In 2015 the Zimbabwean dollar, after years of hyper-inflation, had become virtually worthless, and trade was being conducted in other world hard currencies. Now that Mugabe is leaving, perhaps the Zimbabwean dollar will obtain a value again.

In a similar fashion the S.African Rand was at 15R/£ in 2008, but after a few years of President Zuma`s careful attention it had fallen in value to 23.5R/£. Now that he is at long last heading for the sunset, and a cosy retirement, it has recently strengthened to 16R/£.  It will be good news for investors if Mr Cyril Ramaphosa is also able to ring the changes on the South African economy and the Rand continues to strengthen.

There are many funds that have Africa in their title, but frequently their investments are in international companies and are continent wide.

These two occasionally turn up in the Saltydog numbers.

  • African Opportunity Investment Trust
  • HSBC MSCI South Africa ETF

There are also many Emerging market unit trusts that have a percentage of their investments in Southern Africa but then you also carry the baggage of the other country investments.

If the above scenario was to come to pass, it would be nice to find that unit trust fund which was more country specific. Of course one would want to know that the above process was definitely, and irreversibly, underway before making an investment.

Using nautical terminology; “when approaching an unknown coast or port it is better to do this on a rising tide”. That is sound logic, and anyone who thinks otherwise should submit to counselling!

 

What has been is what will be, and what has been done is what will be done, and there is nothing new under the sun. (Ecclesiastes)

The Dow Jones Industrial Average has recently had its largest single day fall of the last six years, with this coming after one of its largest one year rises. This fall then spread to all other world markets.

For somebody who had been invested through this bull market, the fall represented a mere couple of months of previous rises. So why all the upset, and why do I feel so unsettled? Obviously, it is because I don’t know which way the markets are going to move, and I just really, really hate that uncertainty.

Is this a minor blip, or are we heading for a major correction? Who knows; market overpricing and the potential of rising inflation are worrying, but countering that, the world economy is said to be growing, so where to next?

There are those that say we are due another major correction because that is just the way of the world. I have some sympathy with that statement when I look at the graph of the FTSE100 over the last 25 years.

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For a variety of reasons these corrections do occur. First there was the bursting of the dotcom bubble, then in 2008/9 it was the financial crisis, in 2011 it was the Eurozone debt crisis and in 2015 it was a panic over China`s growth. They are like rogue waves at sea, they are just going to happen. However, that is not to say there aren`t signs that suggest being cautious.

We have just experienced a minor roller, which might or might not be the precursor of a damaging investment tsunami. So in my book, it was a straight-forward decision and I have put on my life-jacket and sold off some of my funds into cash.

If nothing adverse materialises then I have lost a gain and will buy back again later, but if the worse happens and the markets do crash then I have suffered less of a loss. That is my preferred position. I am not in the lifeboat yet, but I have one hand on the gunwale.

Please remember that I am not a financial shaman, but just an ordinary DIY investor with access to fund performance numbers. I am in the same position as yourselves, and like you I am bombarded by commentary about Cape Numbers (performance index) and VIX numbers (volatility) and articles written by readers of chicken bones all telling me that I should be able to tell what is going to happen next.  Well I cannot, and nor can they!

The only thing that I do know is that in the past when there have been falls, the recovery time varies from a few weeks to over twelve months, and that is fact. You can take precautions and reduce your exposure to the markets or you stay where you are and see what happens. You pays your money and takes your choice, quite literally!

At times like this I am reminded of the Jesse Livermore quotation…

“No person can accurately predict what will happen in the future, and you should not listen to people who tell you that they can.”

 

Everyone has a photographic memory, some just don’t have film!

I have recently been reading about the Kennedy clan and how their vast wealth was generated.

The Kennedys moved from Ireland to America in the mid nineteenth century, but did not start to accumulate wealth until Joseph P.Kennedy took the family reins at the beginning of the twentieth century. He is reputed to have made his money from trading on the stock market, in transport, real estate speculation and liquor distribution. Although he went on to become the Chairman of the Securities and Exchange Commission, and the American Ambassador to Great Britain, many of his methods of accumulating his business success were questionable.

Today the billion dollar fortune that he created still carries on down through the Kennedy generations, protected by family trusts.

Now why might this be interesting to a Saltydog investor? Here is why.  A great deal of his wealth came from his liquor distribution business, which straddled the ending of prohibition in America. The consumption of alcohol simply exploded with the changing of the law and this created a vast fortune for Joseph Kennedy.  He subsequently re-invested this into the stock market and real estate with – it is rumoured – considerable help from his friends!

Again today we have a similar situation in America, as the law is changing so that the production and use of Marijuana will no longer be illegal. It is used both medically and also personally so there could be a similar explosion in demand as that which occurred for liquor at the end of prohibition. This requirement will be met by legal farming and conversion companies, in which it should be possible to invest.

There are already a couple of ETFs taking advantage, like the Horizons ‘Marijuana Life Sciences Index ETF’ (HMMJ), which was launched last April in Canada, and the ‘ETFMG Alternative Harvest ETF’ (MJX), which was launched in the US at the end of last year. Another ETF, ‘Marijuana Opportunities Fund’ (MJJ) began trading last week in Canada.

Although these funds aren’t readily available in the UK at the moment, they will be at some point. Your broker may also be able to get hold of them if you ask.

I hasten to add that I am not advocating or encouraging the use of drugs, although my wife says that perhaps if I were to participate I might get my film back!