Financially Speaking October # 2, 2008

An easy reading letter below. If you’re an investor, take a moment to see what I’ve been up to.

Wall Street

Dear Client,

On Thursday and Friday last week I had the wonderful opportunity of being one of only 17 Independent Advisors from around the country to be hosted by Allan Gray in Cape Town for two days. The objective was to be able to have one-hour presentations and interaction with Unit Trust Fund Managers who have funds on Allan Gray’s Investment Platform. We listened to fund managers or analysts from Allan Gray, Coronation, Investec, Prudential, Stanlib, RMB and Sanlam. What one does in these sessions is listen to them tell you how their fund is positioned, what they got right or wrong over the last quarter or year or two, why they have reduced their (for example) resources holdings and increased their holding in MTN or Woolworths etc. They also talk about their economic views of the country and the local and foreign stock markets and economies. They are great times of learning and of developing a more personal relationship to the funds.

From Investec we listened to Sam Houlie, the Head of Equities and fund manager of the Cautious Managed Fund that some of you are in. I discussed the 4 mainstream Investec funds with him and then I discussed how his fund had not yet challenged Allan Gray’s Stable fund enough yet. He laughed and agreed that he had got a couple of calls wrong but was optimistic for the future. I liked him and told him I’d still use his fund. We ended on a good note with personal hand shakes.

During a gap of time I also took myself off to an appointment with Paul Cluer, the Managing Director of Foord (Pronounced Ford) Asset Management. Foord’s offices are in Cape Town too, so it was an opportunity to see the bricks and mortar and to have some personal time with him to understand how they are working. I was also able to question their banking and payment and investing systems to see how safe, secure and well governed they are. A good group Foord; I will continue to use them.

Each of the speakers spoke to the immediate situation of the market turmoil over the past week or so. And it was happening almost hourly while we were there. They spoke of the reasons behind what’s going on, why SA banks have been shielded, where they see the next year, how long they expect for correction. They all spoke of how, in times like these dramatic market collapses, people exit the markets and flee to the money market, or cash, when it’s actually time to buy shares. The markets are having a “Red Hanger Sale”. It’s like being told that suddenly you can buy 2 litres of milk for the price of one, that flat screen TVs are at a 50% discount, that if you fly this week, two can fly to London for the price of one. So therefore, if you buy into unit trust funds now and thus the underlying stock market shares, you are actually getting good companies at huge discounts. International companies are now trading at valuations we’ve not seen before, they said.

So, for those of you who are long term investors, you need to get out of cash and into the markets. It’s often that very first upswing and initial 20 to 40% movement that most investors miss in times like these. See Warren Buffet’s current comments on the situation:

http://www.marriott.co.za/home.php?context=public&app=public_home&nav=news&msgid=50&msgcs=a0cd150f69c

Regards,
Kevin

Please note that all the views expressed in this publication are based on my opinion and no action or advice is implied or intended.