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Dave Pohl & Associates Quarter 4 / 2015 7 Reasons to stay calm when the market tanks The Dow fell more than 300 points on the afternoon of Monday 28 September 2015. The month of August was no fun for investors either, as news of a slowdown in Dave Pohl & Associates the Chinese economy caused the U.S. stock market to have several of its worst Registered Financial Planner days in years. Is it time to panic? For these 7 reasons you shouldn’t. Dave Pohl & Associates post P O Box 465, Lanseria, 1748 It seems likely now that 2015 will be a 2. Most Market Corrections Aren’t That Bad mediocre year at best for anyone who There’s no doubt that some market crash- Unit B Three Seasons Office invested in stocks. But the stock market es cause a lot of pain. But not all drops in office Park, 7 Spring road Rivonia does take a tumble from time to time, so the market resemble those of 2008-09 or it’s important to remember these rea- the Great Depression. An examination of sons why you should not freak out when the top 20 one-day losses by percentage [email protected] email it does. of the Dow Jones Industrial Average 1. It Always Goes Back Up shows that nearly all took place around the financial crisis of the last decade, the If you’re upset to see the market drop, web www.davepohl.co.za Great Depression, or immediately after you should be encouraged to know that it the market re-opened a week after the always has risen back up to new heights. terrorist attacks of September 11. In other In fact, almost every down year of the phone 011 807 1052 words, the big and painful drops only S&P 500 has been followed by a year with come around once in a generation or so. better-than-average returns, according to The rest are relatively modest and man- cell 083 653 6255 data compiled by NYU’s Stern School of ageable dips. Business. A 3% decline in the S&P in 1990 was followed by a 30% rise in 1991. A 3. It’s Bargain Time! 011 807 3815 fax 24% drop in 1974 was followed by a 37% Haven’t you ever wanted to buy some rise in 1975, and another 23% rise in blue chip shares, but didn’t have the FSP 12436 1976. cash? Well now is your chance! Usually, And what happened after the market when the market takes a dive, it’s a Matthew Pohl tanked in 2008 and 2009? Well, it took a chance to buy shares of some very solid assist [email protected] while, but all losses from that drop would companies at a great value. If a compa- Richard pohl have been regained by 2012, and the ny’s fundamentals are strong, you should assist [email protected] market continued to rise for three more not be wary of investing in that company years after that. If you panic and sell simply because the broader stock market Estelle Earl when the market drops, you miss out on is down. Lower prices equal an opportuni- assist [email protected] these gains. ty for profits. Quarter 4 / 2015 4. Corrections Are Often Healthy but could it be a positive sign for the S.A. economy? Economists are divided on Big drops like the one we saw in 2008 can what the financial outlook is for South sometimes be the result of a major prob- Africa and that our economy is better lem in the financial sector. But usually, compared with the Brazilian economy. the market dip comes because valuations of companies were out of line with earn- Once held up as a shining example for ings. When the market is “fully valued,” South Africa to emulate, the Brazilian it’s hard for investors to find reasonable economy has since plummeted into eco- prices for stocks, and new investors are nomic turmoil. It seems to be a bad omen reluctant to enter the market. Any drop for the local economy, which some ana- of less than 10% is seen as healthy under lysts fear could go the same way. The two these circumstances, and it can help share several characteristics, including avoid a much larger and painful crash poor growth prospects and current ac- later. count and budget deficits, a bloated pub- lic sector, a high debt to gross domestic 5. You’ve Planned for It product (GDP) ratio, declining labour If you’re close to retirement, you likely productivity, low global competitiveness, already adjusted your portfolio to more vulnerability to commodity prices, a vola- When the market conservative investments including bonds tile and weakening currency, and an en- and cash. If you have many years before demic culture of corruption. you retire, then you have plenty of time According to Raymond Parsons, a profes- is “fully valued,” it’s to make up losses and can benefit from buying low now. Don’t stress. These types sor at the North-West University business school, negative global economic devel- of market downturns were all factored in hard for investors opments, including the slowdown in the when you started investing. Chinese economy, “has exposed South 6. The U.S. Economy Is Still Healthy….but how Africa’s weaknesses rather than caused to find reasonable is the SA economy doing? them”. Realistically, he said, “the jury is The stock market and the economy are still out between a recession … and a low prices for stocks, two different things. Sometimes, the growth trap. We still await definitive eco- stock market will struggle due to underly- nomic data.” Let’s hold thumbs! and new investors ing economic problems in America, but 7. Bonds Prices May Go Up often a market dip is related to broader When stock prices go down, bond prices global issues, or even a bad news event. are reluctant to usually rise. And this is good for bond- Consider that the most recent market correction took place at a time when the holders who may be looking to cash out. Higher stock prices do hurt bond yields, enter the market. unemployment rate is at its lowest rate in but this is not an issue for current bond- seven years. holders who have interest rates locked in. So the U.S. economy doesn't look too bad Quarter 4 / 2015 Rugby riches At the time of publication, the 2015 Rugby World Cup was well underway. In keeping with a financial publication, this article ignores the on-field events but looks rather at the financial aspects of what is expected to be one of the best attended and most lucrative sporting events in history. Rugby fans are all aware that the tourna- Cup (although some matches are being ment organisers offer the winners a 4.5 played in Wales). In return for the hosting kilogram gilded silver trophy known as rights they paid a record fee of GB£80 mil- William Webb Ellis the “Webb Ellis Cup”, named after the lion – a large portion of which was under- boy credited as the inventor of the game. written by the UK Government. That fee Rev. William Webb Ellis (24 November 1806 – 24 But it may be surprising to learn that that was up from the £55 million that New Zea- February 1872) was an Anglican clergyman and is all the organisers offer: unlike most land paid to host the 2007 tournament. In the alleged inventor of Rugby football whilst a other international sporting events, the return for paying the tournament hosting pupil at Rugby School. The William Webb Ellis Rugby World Cup organizers pay NO prize fee (and incurring the costs of organising Cup is presented to the winners of the Rugby money to the winning team or players (of the tournament), the host union keeps all World Cup course the players don’t go home empty the ticket sale proceeds for the tourna- After his father was killed at the Battle of Albuera handed – they arrange financial incen- ment. in 1811, Mrs Ellis decided to move to Rugby, tives with their home unions). In addition to the host’s tournament fee, Warwickshire so that William could receive an The economic rights to the Rugby World RWCL then generates further revenue from education at Rugby School. He attended the Cup are held by World Rugby, the Ireland the tournament through broadcasting, school from 1816 to 1825 and was recorded as -based organisation which controls world sponsorship and other commercial deals. being a good scholar and cricketer. The incident rugby (known until last year as the Inter- The 2015 Rugby World Cup is expected to in which Webb Ellis supposedly caught the ball in national Rugby Board). World Rugby generate over £230 million for the RWCL. his arms during a football match (which was holds these rights through Rugby World This compares very favourably with past allowed) and ran with it (which was not) is sup- Cup Limited (RWCL), a wholly owned tournaments as can be seen from the table posed to have happened in the latter half of company formed for that purpose. World on page 4. 1823. After leaving Rugby in 1826, he went to Rugby is made up of 117 national associa- World Rugby uses the profits it makes from Brasenose College, Oxford, aged 20. He became tions (of which South Africa is one) well known as a low church evangelical the tournament (mostly tax free in terms of clergyman.

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