A message from Mark Jurgens
Lockdown or not, time continues to fly by with Autumn and Easter already dawning upon us!
Currently, 2021 is certainly looking more positive than our more challenging 2020. Although vaccine rollouts may be slower than we would have liked, there is light at the end of the tunnel which promotes a positive mindset. There may well be a third wave affecting us in the months to come, but countries around the world are administering numerous vaccines. This bodes well for controlling the virus on an international scale.
With all the challenges faced over the last year, from a financial point of view, the investment portfolios are looking healthier than they have in a long time, particularly South African equities. After a fiveyear period of the JSE performing poorly, there are positive forecasts from Ninety One and Coronation, who believe that the JSE will have far more competitive returns over the next five to ten years. We have already seen a marked improvement in our local market over the past few months.
Coronation expected Asset Class Returns for next 10 years are highlighted below: Source : Coronation
As you are aware, interest rates in South Africa are at their lowest they have been in fifty years. Money Market rates are a mere 3.5%. However, this coupled with our low inflation rate of currently 3%, is providing relief for those carrying debt. This level will probably continue for the balance of the year. Bearing this in mind, in the South African context, historically an 8% return does not appear very competitive. However, this equates to inflation plus 5% which may mean that we need to adjust our expectations.
A historical fact for those of you who may find this interesting, the South African Rand turned sixty years in February this year. South Africa officially replaced the Pound Sterling to that of the South African Rand. At that time, the exchange rate was approximately R2 to £1. The change in currency happened just three months before South Africa declared itself a Republic and left the Commonwealth of Nations on 31 May 1961.
Most members of the Jurgens Group team prefer to be in the office as opposed to working from home. At all times, strict COVID protocol is adhered to and our clients who feel comfortable with these measures in place, enjoy visiting our offices. Above from left to right are Lynette Govender, Sherry Mazamisa and Lemeryn Olivier (masks removed for photo only)
Crypto Assets in a diversified portfolio maybe just a “Bit” from Alan Botha
Who would have thought we would sit here, approximately one year on from the Wuhan outbreak, in a continued state of instability? Even though we were all hopeful that 2021 would start on a better footing, numerous countries are still in lockdown and fighting against the second, third or fourth surges of Covid-19 infections. Economies worldwide continue their struggle and government support remains rampant. For humanity, we gladly waved goodbye to 2020, but for markets, we have seen a period of surprising benefit and near-record highs.
Since the market bottomed in April last year, returns have been strong by historical standards—certainly for risk taking clients but even for the conservative minded. Investor sentiment has lifted across the board, with the rollout of a vaccine worldwide alongside the perception of greater political stability.
Policy intervention by central banks and governments have translated into a huge amount of being pumped into the financial system post the Covid-19 pandemic. With interest rates and yields around the world at historic lows, investors have been forced into other assets to achieve appropriate returns and combat the eroding effects of inflation.
One “investment”’ that has become very popular of late is Bitcoin and the price resurgence from $3 500 dollars a coin, at end of 2019 to close to $50 000 at the time of writing, has been mind-blowing. The question is, should I own Bitcoin as part of a diversified portfolio?
Firstly, it is important to note that buying cryptocurrencies has never been a one-way bet and movements or volatility in price can be very large and very swift, the reality is that Bitcoin has no intrinsic value based on fundamental analysis and is largely driven by sentiment, with massive demand pushing up the price to lofty levels in the past few months.
We can reason Bitcoin does not have intrinsic value because regardless of the underlying technology (Blockchain), it does not produce any income or cash flow that can be projected into the future and valued. One thing that Bitcoin is often referred to as “digital gold”, however physical gold is tangible and for centuries has been recognized as having value, and widely used as a hedge against inflation and other economic risks.
Therefore, Bitcoin is essentially driven by demand and supply principles and the value is what someone is willing to pay for it, hence the huge swings in price on a day-to-day basis. In saying this, Bitcoin has most recently received much more interest from larger investors like banks and investment managers, this obviously does not guarantee that the current price is sustainable or imply that Bitcoin price rise is still in its infancy, however it appears as if Bitcoin now is being considered more seriously as part of an overall portfolio allocation.
Overall, we are sceptical about the case for bitcoin as an investment asset. Its popularity with momentum investors and speculative buyers makes it prone to pricing bubbles that we think will eventually burst. It is also nearly impossible to pin down what its underlying value should be. As mainstream investors increasingly embrace bitcoin, its value as a diversification tool is diminishing; as a result, there is no guarantee that adding bitcoin will improve a portfolio’s risk-adjusted returns, especially to the same extent it did in the past.
It must also be mentioned that although Bitcoin is the most well know crypto currency, we estimate that there are over six thousand crypto currencies that have been launched, all looking for market share. With technological risks and governments around the world starting to extend regulatory oversight to these crypto assets, it is difficult to predict what the future holds. However, there are some compelling arguments in favour of bitcoin as an alternative currency and as a commodity that can help support new technologies, such as smart contracts and more-efficient financial transactions with built-in encryption (additional security).
For that reason, bitcoin is probably best used in (very) small doses as a hedge against weakness in the dollar and major disruptions in the global financial system.
Short Term News Update - Greg Brits
My Cylution – Online fraud, identify theft, and cyberbullying product From Banking App losses to cyberbullying and identity theft, our digitally integrated lives are becoming more vulnerable to personal cyber-attacks.
Through Jurgens Insurance Brokers and in association with Itoo and Hollard Insurance, our Cyber Experts are highly respected industry leaders who understand the intricate actions needed to protect and cover you and your family.
Designed by South Africa’s top cyber mitigation specialists, the personal cyber insurance offering called MY Cylution provides cover, that has been uniquely tailored to meet the South African market’s needs.
Life happens online 24/7. So does crime. Isn’t it time you were personally covered against cyber crime?
Examples what is covered:
- Identity theft: costs resulting from identity theft including: reporting the identity theft, re-filing rejected applications, notarising affidavits, credit and identity theft monitoring, re-issuing identity documents and lost wages.
- Data restoration / malware decontamination: costs to restore data and software resulting from a cyber incident.
- Cyberbullying: costs resulting from cyberbullying or stalking including: removal of content, lost wages, trauma benefit and experts to manage and protect your reputation.
Including R5000 cover for the following:
- Trauma Benefit: a financial payment to assist in alleviating the reasonable financial burden incurred for the treatment of emotional trauma by a licensed professional, as a direct result of cyberbullying, cyber stalking or the publication of harmful material.
- Additional School Costs: additional costs for school fees, school uniforms and educational material should it be established by a licensed physician or psychologist that an insured child needs to be placed in an alternate school as a direct result of cyberbullying, cyber stalking or the publication of harmful material.
- Cyber extortion: reimbursement of ransom payments resulting from an extortion demand.
- Network security Privacy & data breach liability: Please contact us to discuss this product further.
Staff News
Congratulations to Andrea Collins who has been an integral member of the Jurgens Finance team for 5 years. She has grown from strength to strength and her commitment and loyalty is much appreciated. Award was proudly presented to Andrea by Mark and Alan. Other exciting news is to congratulate Andrea and Brendan on the birth of their second son on 9 March.
Quote of the day
"Procrastination is like a credit card; it's a lot of fun until you get the bill"