Weathering the storm - fortitude

Monday's news about Bear Stearns - the fifth largest US Investment Bank - being sold to JP Morgan Case for a mere $2 a share after it was trading at $30 a share on Friday last week spooked global markets. At the same time the US Fed gave JP Morgan an additional line of credit and eased the discount rate [the rate the Fed lends to banks] by 0.25%. On Monday [17 March] the JSE All Share Index buckled at one point losing 4% with financial stocks losing over 6% but closed at just over 2% down. On Tuesday, the Fed cut US lending rates by a further 75 basis points.

US President George W Bush had to assure the American public of the resilience of the economy. Bush acknowledged on Monday, at the Economic Club of New York, that the country's economy was going through troubled times but cautioned against overreacting to current problems saying such actions could cause longer-term problems.

It is widely thought that there will be further fallout stemming from the sub-prime crisis in that other US financial institutions might need to be bailed out. It is almost a given that the US is in a recession but it is yet to be seen how long and protracted this slowdown will be and its effect on the rest of the world.

But where does this discomforting sentiment leave you? Naturally investors are nervous. This is the time for staying power - common sense prescribes the value of a diversified portfolio. An often stated phrase is that one cannot time the market but one must rather spend time in the market.

Silke Financial Services advocates that long term investors stick to their disciplined investment approach as their personal goals and objectives have not changed. The good buying opportunities are ever-present. Clients investing in equity unit trusts should keep on investing as lower equity prices means that you will earn healthy profits in the long term. Your patience will be handsomely rewarded.

Silke Financial Services has the skill and expertise to construct a well diversified portfolio to suit all risk profiles according to a client's investment time horizon.

If you have any queries regarding the above commentary please contact us on 021 683 3380 or info@silke.co.za.