Moneyweb Investment Seminars - Peter Major
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Moneyweb Investment Seminars - Peter Major

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Volatility is your friend... if you know your assets...

Volatility is your friend... if you know your assets...

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Moneyweb Investment Seminars - Peter Major Moneyweb Investment Seminars - Peter Major Presentation Transcript

  • Volatility is your friend… …if you know your assets Peter Major
  • Volatility is your friend… …if you know your assets
  • How does „volatility„ help or hurt the 5 assets? Cash : Rand, $, Euro or other Bonds : Local, Foreign. 10 yr, 20 yr. Govt or private Gold : Local & Foreign. Bullion, ETF‟s, Equity Property : Local, Foreign, Listed, Non, Residence? Equities : Local, Foreign, Indices, Sectors, other
  • Introduction Peter Major Fund Manager, Analyst, Consultant – Cadiz Corp Solutions 2006 - current CIO, Fund Manager, Analyst - HBD Asset Management 2001 - 2004 Fund Manager, Mining Analyst – Nedcor Investment Bank 1991 - 2001 Gold Analyst – Allan Gray Investment Counsel 1989 - 1991 Consultant & Marketing Manager - EIMCO Mining Machinery 1986 - 1988 Came to South Africa – Harmony Gold Mine, MBA (UCT) 1982 - 1984 B.Sc Min Eng - Montana School of Mines 1977 - 1981 Began mining in Kellogg, Idaho, Montana, Alaska, Canada 1972 - 1981
  • The SA JSE 120 Years of Commodity Investing
  • 1973 Grizzly Man Sunshine Silver Mine, Kellogg Idaho
  • 1977 Timber & Lumber Jennis Bay BC, Canada
  • 1990‟s International equities Idaho Silver Mines
  • 2001 Asset management All categories listed & unlisted
  • 2007: Listed & Private Equity, Corporate Finance, other
  • Volatility is your friend It gives you „opportunities‟ VOLATILTY is not just „how often‟ something changes It is also – by „how much‟ - something changes Some people associate „volatility‟ with risk. Wrong! VOLATILITY is OPPORTUNITY. Another chance! How many times do you get a second chance in life? It‟s almost impossible to outperform without volatility!
  • SP Volatility Index: Average = 20 VIX (Implied volatility of S&P 500 index options) 90 80 70 Annualised Volatility (%) 60 50 40 30 20 10 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Year Last Price 30 Day MA 180 Day MA 360 Day MA
  • Let‟s look at volatility of the 5 asset categories Cash : Rand, $, Euro or other Bonds : Local, Foreign. 10 yr, 20 yr. Govt or private Gold : Local & Foreign. Bullion, ETF‟s, Equity Property : Local, Foreign, Listed, Non, Residence? Equities : Local, Foreign, Indices, Sectors, other
  • Massive leverage „Magnifies‟ volatility
  • SA 20yr bond sensitivity Yield % Yield at exit today 11 10 9 8 7 6 11 11 15 19 24 30 36 10 6 10 14 19 24 30 9 1 5 9 14 19 24 8 -4 0 4 8 13 18 7 -9 -5 -2 3 7 12 6 -14 -10 -7 -3 1 6 2 Yr pa TRR
  • Simple Average Returns (in Dollars $) 30 25 22 20 Returns (%) . 16 16 15 15 13 10 5 0 5 yrs 10 yrs Time periods 20 yrs 30 yrs 50 yrs RESI ALSI Property Gold Bonds Cash
  • Simple Average Returns (in Rands) 30 25 19 20 20 19 18 Returns (%) . 15 15 10 5 0 5 yrs 10 yrs Time periods 20 yrs 30 yrs 50 yrs RESI ALSI Property Gold Bonds Cash
  • Summary Always start with the macros: international markets, i rates, PE‟s & other Analysing how each of those affect the 5 asset categories. Always know „which‟ assets are „extended‟ – i,e „outside their norms‟ Do you „really‟ want to hold an asset 1 or 2 standard deviations out? Re-visit your goals – and your reasons for holding the asset Are these reasons at odds with each other? With the facts at hand? And ask yourself – “am I being too greedy – or too conservative now?” YOU CAN’T ‘OUTPERFORM” – BY FOLLOWING THE MASSES!
  • Because in the end MOST things revert to the „mean‟
  • Talk is talk: It‟s cheap. And there‟s lots of it “I think it is an immutable law of business that: words are words, explanations are explanations, promises are promises – but only performance is reality” Harold Geneen ITT CEO
  • Thank you Peter Major