In 2018, very high market volatility is the new normal. From Bitcoin and emerging market currencies to blue chip stocks, there’s only one certainty – the trading value of commodities, shares and cryptocurrencies is becoming increasingly unpredictable.
JSE hits 14-month low
In early February, the JSE All-Share Index dropped to a low of 3.5 percent in intraday trading. The bourse plunged to 55 090 points off a record high of more than 61 684 points recorded only weeks earlier.
The free-fall was in keeping with a global sell-off that wiped $4 trillion off the value of global equities. Fears of an interest rate hike by the US Federal Reserve created a ripple effect that quickly grew into a worldwide equities rout.
Steinhoff rocked local bourse
Here at home, the Steinhoff scandal rocked the market, as well as investors’ confidence in the independence of the auditing sector. The global retail giant’s shares nosedived by more than 60 percent in one day’s trading on the JSE.
There was similar carnage on Germany’s Dax. Almost €10.3 billion was wiped off the value of the company over a couple of days of trading.
Bitcoin bubble bursts
Early this year, the historic bull run that saw the value of Bitcoin (BTC) soar from $900 to a record high of just under $20 000 in December 2017 came to a screeching halt. Days later the price of BTC dropped by 30 percent. Today, the average trading price of one Bitcoin is $10 928.
Capitec Bank scare crushes investor confidence
The big Bitcoin bust was followed by the Capitec Bank scare. Viceroy, the same research group that exposed the shenanigans at Steinhoff, published two reports accusing South Africa’s second largest bank of unethical lending practices.
With two of the biggest players on the JSE under scrutiny for dodgy practices, and the Bitcoin price zigzagging up and down the Bitcoin Price Index (BPI), a question for investors is “where do I invest my money during periods of extreme market volatility?”
Physical assets an advantage
Physical assets always become more attractive when market volatility is high. This includes assets like precious metals, as well as “passion assets” such as rare, high-value items – classic cars, jewellery, luxury watches, coins, antiques and works of fine art. They serve as a potential investment hedge to market volatility.
You can hold, admire or wear these assets, move them easily across borders when and if you relocate to a new country and sell them when the demand is high and the price is right.
You don’t have to pay fund managers or financial advisors to manage these assets, and the only tax you’ll ever pay is Capital Gains Tax (CGT), when you sell.
Invest in the right asset at the right time and the return on investment (ROI) can be impressive. According to the Coutts Index – an index that has tracked the value of certain asset classes since 2005 – the total value of passion assets has risen by 76.6 percent over a 12-year period.
Returns on watches and jewellery have risen by 104.8 percent and 148.8 percent respectively, classic cars by 331.95 percent, coins by 224.6 percent and fine wines by 153.1 percent.
The hidden value of tangible assets
In addition to the resale and emotional value of rare items and objects, these tangible assets have intrinsic worth as collateral. In other words, you can unlock their value, without having to sell them, by using them as security for a loan.
At lamna, we offer fast, discreet loans against the value of a wide range of assets, from luxury watches and jewellery to vehicles or artwork. We’re a registered financial service provider and our interest rates are in keeping with the National Credit Act.