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Why go invest overseas?

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G_V_V
Super Contributor
In South Africa long term Industrial shares go up between 12% and 15% with dividends, the rand depreciates long term at about 5% and in the Western world shares go up long term about 5%. So it has and I think will be in the foreseeable future more profitable to remain invested in South Africa because the returns are 100% more than overseas, !5% less 5% devaluation of the rand is 10% which is 100% more than overseas. In 1960 the industrial share in south Africa were 81.25 now they are about 54000 which is about a 13% compounded, add the dividends and you get over 15%. The Dow in 1965 was 1000 and is now 16400 which is 5% compounded add the dividends and you get about 6%. You do the maths.
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21 REPLIES 21
barry_1
Super Contributor
Do not make any mistake, I have done extremely out of local industrials over the last ten years! Now how ever labour sees their profits and are easily influenced by radical politicians thinking. Unrealistic demands, plus government seeking ways to tap in to what they see as largesse! Yes extra taxes. Cheap imported goods are becoming a thing of the past with 22% weakening of the Rand The past is no predictor for the future.
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THRESHOLD
Super Contributor
Without going into detail about the rest of this... the Rand has weakened 33x (against the USD) in that period (we were linked to the pound and traded at something like 3usd to the pound)- so 54000/33 = 163. This is a pretty paltry return.
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THRESHOLD
Super Contributor
Without going into detail about the rest of this... the Rand has weakened 33x (against the USD) in that period (we were linked to the pound and traded at something like 3usd to the pound)- so 54000/33 = 163. This is a pretty paltry return.
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THRESHOLD
Super Contributor
divide by your 81.25 = about 20x your money in 54 years.
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THRESHOLD
Super Contributor
BTW - I stand to be corrected on the 1960 ZAR exchange rate - I can't find a chart that goes back that far.
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THRESHOLD
Super Contributor
OK - 5400/15 (per fxtop) x 81.25=29K
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prancing_horse
Super Contributor
In 1970 my Father bought an apartment on the Italian Riviera near the French boarder for R13500. As I've wanted to upgrade I thought I'd test the market, the agent said for a quick sale I'd get 380000 Euros, even at exchange rate of 13:1 that translates to R5 mil. As for upgrading, beyond my pocket at present as one is looking at between 550 and 600 thousand Euros.
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THRESHOLD
Super Contributor
Y - we are like the frog in the pot of hot water. We are all slowly drowning in the Rand. When one factors the Rand's slowish-motion capitulation into the supposedly wonderful local returns - well - they don't look nearly as exciting.
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Not applicable
oh come on folks --- why all the doom and gloom? A weak rand gives plenty of sectors excellent opportunities, especially the beleagured manufacturing sector. The US was crying for a devalued US$ during 2008 - 2009. And as for labour unrest - well I ask the question - how can any society be crying over laborers demanding a R2000 a month increase - and this constitutes a 40% demand? There is something structurally wrong in the SA labour market. And if mines etc capitulate - why would that necessarily be a bad thing - so don't invest in a mine, but what about all the peripheral industries that will benefit from a growing lower middle / middle class? Now lets talk about Africa - Nigeria will be the largest economy in Africa in our lifetimes - some predict in the next 20 years. That is great for us, it gives us a significant regional trading partner for a change. It will boost all the regional economies, which will in turn boost us - SA manufacturers, retailers and anyone else exporting goods or services, if they are not able to find an edge in such a growing climate being African, don't deserve to call themselves African!
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kwagga
Super Contributor
True, but a weaker rand also offers opportunities for exporters, or companies earning most of there money outside the borders of SA. There will always be enough opportunities on SA markets to enable you to retire comfortably. They might be less at times, but they are always there. People are complaining about the value of the dollar diminishing, so what are the chances of you being able to protect yourself at all times against a diminishing rand ? The best you can do is a diversified portfolio at all times, and I'm a firm believer that that should include some property (commercial and residential) as well.
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THRESHOLD
Super Contributor
The industrial complex has been decimated for a whole host of reasons. So... nothing much to export. There have been a couple of interesting articles about this recently by Sussman, Roodt and others.
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partridge
Super Contributor
I think that rewards exist for well run adaptive and moated businesses - regardless of where in the World they are situated. What you earn is reflected in the price. But as we all know the price is not always "correct". eg Old style mining is on the way out but don't think that this means mining is "over "and so on.... the drift of the discussion implies that SA business and mining are frogs in the saucepan - they are not - at least the one's who are worth investing in are not passive... Converting your foreign currency returns into ZAR without first asking the question "where is this money going to be "spent" is a waste of time. The last time the ZAR was oversold and reached ZAR:USD 13 (?) or so there were thousands of short termer's who unwisely "followed the trend" and invested "overseas" - and then spent the next 5 or so years regretting it...
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kwagga
Super Contributor
Somehow, I don't think you're going to die poor. Why all the negativity ? At least you've got the means to exploit new opportunities coming your way. If all is doom and gloom, then sit on your hands for a while. I'm not a fan of Dan Roodt. Pity Van Zyl Slabbert is not around anymore. I had huge respect for the man. A true luminary.
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barry_1
Super Contributor
The main mining groups lean over backwards in employing as many miners as possible. How ever if they are to pay much larger amounts they will be forced to cut the labour force drastically, to survive. Every body is entitled to their opinion and it is not unpatriotic to have a different view.
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THRESHOLD
Super Contributor
I cannot see how the Rand is going to recover. We have an expanding deficit; a balance of payments that marches relentlessly into the red. Government salaries will exceed our GDP by 2020 at current rates. Where does this leave us? Technically (for those who are so inclined) - the Rand is breaking through a triple top on a 14 year consolidation - very ugly. In 2000 here was hope and still the rand proceeded to lose 60% of its $ value. Yes there were those "pops" to the upside but this time it is a concerted unrelenting push higher.
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prancing_horse
Super Contributor
Not Doom and Gloom ...Reality. That doesn't stop one from exploiting or trying to exploit opportunities when they arise. I for one, have in the last year invested a fair amount in purchasing a meat processing plant that went into liquidation and has a decent contract in supplying P&P in 4 provinces, and currently negotiating another fair sized purchase from the same liquidator. However my eyes are open enough to observe what is happening around me, having a father-in-law murdered, a member of staff killed on the way to the bank, my one partner held up seven times, before deciding to leave SA (at the age of 67), I've had a silver 9mm held to my head, mugged after leaving a rugby match, 3 vehicles stolen, the list is endless. Add to that the powers that be, with hands in the cookie jar while their brothers are hungry, you have a recipe for you know what. I'm still here and intend to stay here, however "land of milk and honey" no longer.
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topgun
Super Contributor
Not to worry, this will certainly not happen here as SA has one of the world's best constitutions...http://www.moneyweb.co.za/moneyweb-letters-from-zimbabwe/paying-to-give-away-your-own-company
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Preston
Super Contributor
My understanding was that Zimbabwe has one of the world's best constitutions.
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