Eric Edelstein

I didn’t have a large portfolio on the JSE, and I didn’t have many different shares. But I did have shares in a few companies on the JSE that I thought held potential, and I enjoyed watching both the movement in the share price (especially upwards in the last 2 years), and the way the companies operated.

I’ve been getting a gut feel that it’s time to exit the market, and last week I decided it was time.

So I SOLD.

At the final stages of a bull market, speculators and investors stand to make a LOT of money if they can get their timing right, as the market goes up heavily in a short space of time, but when it comes down, it comes down FAST.

Why am I a SELLER?

1. I attended the presentation by Alec Hogg from Moneyweb on “getting deeper into Warren Buffett’s mindset” 2 weeks ago, and one of the points that stood out was:

Don’t look at the share price, look at the market cap of the company.

(that is what the market believes the company is worth by multiplying the share price by the number of shares in issue)

One of the shares I exited from was new listing Blue Financial Services which listed on the AltX last year. It listed at a market cap of around R350M, (at a R1 share listing offer) and is currently on a market cap of 1.2 BILLION RAND.

Now don’t get me wrong - I invested in the IPO as I went to the roadshow before the listing, and was highly impressed both with the prospects of the company, and with the founder and CEO, Dave van Niekerk. And I haven’t changed my viewpoint - I still think Blue has FANTASTIC potential, and the latest results they just released for their year end justify this viewpoint.

BUT the market has taken ALL companies including BLUE to high too quickly. (I believe the same has happened in the residential property market)

2. I’m concerned about the global financial markets, AND the South African financial markets.

On the global platform, Gold is at a level that would never have been believed 3 years ago, along with a “out of control” Oil Price. So when I saw the Chinese authorities try dampen the rapidly increasing Chinese Stock Market a few days ago by tripling one of the taxes, AND the Chinese market came down nearly EIGHT PERCENT in a day, I realised that the global financial industry is precariously balanced at the moment.

And in South Africa, the spiraling economy in the last few years has resulted in the inflation rate finally breaking upwards through the 3 to 6% level the Reserve Bank has set as its benchmark.  (with no doubt the increasing oil price contributing significantly to this rise).

The interest rate hikes over the last year, don’t seem to have dented the consumer spending mindset of people, and the increased property and stock markets have created an illusion of inflated wealth. A recent poll of economists believes that the Reserve Bank will increase interest rates by half a percentage point this Thursday, and a number believe it will be raised again in August.

So for now, I’m out of the JSE.

But I did use some of the proceeds to invest in an unlisted company this week which I believe is an “untapped goldmine” - details to follow shortly…