Greetings and Happy Friday!
This week two of our clients expressed high interest in cryptocurrencies such as Bitcoin; cryptos are big in the news all the time and so they’re hard to ignore with comments/warnings both positive as well as negative. So what are we to believe?
Back in December 2017, I felt the need to have a personal stake in cryptos primarily as a direct reference and experience which, in turn, I could relay to clients when they enquired about this “new” asset class. So, I bought 10k Bitcoin and 10k Ethereum and sat back and waited for something to happen- it didn’t take long, after going up to total 22k, only to drop down to 8k. It was abundantly clear to me that such a level of volatility would not suit at least 90% of our clients and I felt that, while cryptos were technically an essential part of the future, it was too early to hold any kind of stability or predictability.
But fast-forward to recent months and my two cryptos are now valued 100k and we’re also seeing greater adoption by large corporations and some big players like Elon Musk and others. As financial advisors, we need to provide our clients with a definitive, unbiased, and objective view to help them decide whether or not to invest in cryptocurrencies or any other asset for that matter. We don’t have a crystal ball to see how this will all shake out, so we have to treat crypto as we would any other risk asset and apply the fundamentals, one of which is risk; look at the chart below and you can see that the risk-return ratio of Bitcoin resides in a different universe when compared with the other asset classes:
Clearly, some investors will accept such stratospheric risk for a commensurate return, I mean, this level of risk is akin to actual gambling- I can’t recall anything before that’s been so widely adopted and shown such high returns (and volatility!), it looks like the proverbial gamechanger and that’s what’s getting so many people so excited.
But, apart from the actual price volatility, there are some serious risks to holding crypto, if you lose your password, you could lose your crypto and scammers are everywhere in the crypto world, to name a few, and the fees can be incredibly high to hold them directly. However, we’re expecting the imminent launch of some crypto exchange-traded funds (ETFs) and those will provide far safer and easier access to Bitcoin and Ethereum performance at much lower fees. That way, we can treat crypto as another asset class and, if it suits you, we can allocate an appropriate level of exposure that will make sense in a properly diversified portfolio.
So, for those who are keen, let’s keep a lid on the FOMO (fear of missing out) because it’s always better to be safe than to be sorry.
In the News this Week:
Friday 14 May 2021
US markets staged a turn-around on the release of better than expected Jobless date with Initial Jobless Claims dropping by 34k to a 14 month low.
The data helped European markets to close off their earlier lows. Brent oil dropped 3.39% and WTI Oil fell 3.50%. US PPI data came in above expectations underlining inflation risks. Value and Cyclical shares continue to outperform momentum and growth.
S&P500 +1.23%; Dow +1.29%; Nasdaq +0.72%; DAX +0.33%; CAC +0.14%; FTSE -0.59%
Asian markets bouncing on the back of US jobs data. Rotation out of Tech thematic seems to be continuing in China with regulatory interference adding fuel to the fire.
Nikkei +2.21 %; Hang Seng +0.92%; Shanghai +1.21%; ASX +0.66%
SA market took it’s lead from the US sell-off overnight and all major sectors ended in the red. The rally in US markets at their open came too late to have a meaningful impact but some shares did rally somewhat off their lows. Tiger Brands trading update seemed to impress the market, looks like the turnaround is gaining some traction. ABSA released a positive trading update indicating they are experiencing improvement in their credit losses. Liberty Trading update indicates they are continuing to struggle with new business.
Notable Gainers / Losers
Tiger Brands +4.59%; Sun International +5.00%; Motus +4.11%; Barloworld +3.53%; Dischem +3.69%; Bytes +2.60%; Anglo -4.14%; BHP -3.49%, Firstrand -1.88%, Sibanye -2.86%; MTN -2.02%; Naspers -3.31%; Prosus -3.48%; Old Mutual -2.01%; African Rainbow Minerals -5.20%; Amplats -2.38%; Kumba -4.33%
JSE All-Share -1.86%; JSE Top 40 -1.86%; Industrials -1.48%, Resources -3.05%; Financials -1.13%
JSE All-Share 66’168
S&P500 4’112
USDZAR 14.11
EURZAR 17.05
GBPZAR 19.82
EURUSD 1.21
GBPUSD 1.41
GBPEUR 1.16
AUDZAR 10.91
NZDZAR 10.15
Brent Crude 68.94
Gold 1’827
Platinum 1’212
Palladium 2’856
Sources: Factset; Investing .com; Trading Economics
Please give us a call or email if you need any assistance. Have a great weekend!
Kind regards,
Your TurnPoint Team
Vic Hodoul CFP®
Certified Financial Planner®
Cell +27 (0) 79 353 1076
Email vic@turnpoint.co.za
Office/Admin Manager:
Arlene Schoeman: +27 (0)21 555 1010
Email arlene@turnpoint.co.za
TurnPoint Investments
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Milnerton Office: 5 Royal Atlantic, Sunset Beach 7441
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Tel +27 (0)21 555 1010 Fax +27 (0)86 589 2738
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TurnPoint Investments (Pty) Ltd. Registration Number 2003/020010/07 | Financial Service Provider (FSP licence number 12820) Directors VD Hodoul DL Hodoul