ARTICLES

The JSE is best

PDSnet has what is arguably one of the longest consistent databases of JSE share prices in South Africa. Indeed, there have been times over the decades when the JSE itself has asked us for a copy of our data to replace lost records. This database enables us to go back in history to get some perspective on exactly how good the JSE has been over the long term as an investment.

Last week, on Wednesday 18^th January 2023, the JSE Overall index reached an all-time high of 79865. This is despite all the problems both inside South Africa and outside. This record high must be compared with 28^th February 1985 when the index closed at 939 and, hard as it is to believe now, the rand was then hovering at around R2 to the US dollar. Last week, on Friday the 20^th January 2023, the rand was trading at R17.14 to the US dollar. It has recently been as high as R18.41, on 24^th October 2022.

This means that over that period of almost 38 years, the JSE has gone up on average by roughly 85-fold while the rand has lost close to 90% of its value. This analysis shows that, despite the massive fall in the purchasing power of the rand and its value against first world currencies, an investment in the JSE over that time would have handsomely compensated the investor. Consider the chart:

This is a semi-logarithmic chart of the JSE Overall index from 28^th February 1985 to 20^th January 2023. It shows the effect of the 1987 crash, the 1998 dot-com crash, the 2008 sub-prime crisis, the years when Zuma was president and, finally, the effect of COVID-19.

Throughout all these calamities, high-quality shares on the JSE have continued to grow steadily, more than compensating for the fall in the rand’s value against the major hard currencies of the first world.

So, does this mean that you can take a “buy-and-hold” approach to the JSE? Just find some quality blue-chip shares and hold them for the long term? The answer is “no.” Because the components of the JSE Overall index have changed significantly over the 38 years, as shown in the chart above.

Some of the shares (like most of the major construction companies) have disappeared completely while new shares (like Naspers) are now included. To be successful in the long term, you cannot just buy a bunch of blue-chip shares and put them in your bottom drawer. You have to stay alert to what is going on in the market and make occasional strategic changes.

This does not imply that you will be jumping in and out all the time – just that you will periodically (like once every few years) recognize that the environment has shifted and that which was a good investment ten or twenty years ago has passed its best.

With that in mind, some shares remain evergreen. For example, the earliest price we have in our database for Santam is on 28^th February 1985 when it closed at 90c. Today that share is 26052c and it has been  as high as 30038c as recently as 4^th May 2022. It is what we describe as a “diagonal” share because its chart goes from the bottom left-hand corner of your screen to the top right-hand corner.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

PDSNET ARTICLES

Rand Strength

The strength of the rand is both a critical and a complex issue for private investors on the JSE. Our currency is influenced by two primary forces:

1. Our local economy’s prospects
2. The rand’s role as a leading emerging market currency

These, in turn, are

Sibanye Revisited

In these uncertain times, when nobody really knows to what extent Trump will back down on the international trade war which he has initiated, many investors are moving into precious metals as a hedge against the weakness of paper currencies (especially the US dollar) and paper assets like equities and bonds.

The problem

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Jerome Powell

The Federal Reserve Bank (“the Fed”) is completely outside the control of the President and Executive Branch of the US government. The chairman of the Fed is appointed for a renewable 4-year term by the President. The President cannot remove the Chair without cause. The current chairman, Jerome Powell was appointed by Trump during his first term as President and reappointed by

Uncertainty Soars

Investors are by their very nature risk takers, but they are always trying to reduce the risk which they have to take to a minimum. Donald Trump, with his threat of an international trade war and his on-again, off-again tariffs has significantly increased the level of risk in markets across the world. This can be seen in the extraordinary volatility in the S&P500

Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s

The Creation of Money

The money supply of a country is a symbol of the goods and services of that country. Obviously, if the size of the money supply is increased more rapidly than the real growth of its economy, then you have more money chasing the same goods and services, resulting in rising prices. Since, over the long term, the only organisation that can create money is the government,

V-Bottom is likely

The 10% collapse of Wall Street, which is a direct result of Trump’s random policy of on-again, off-again tariffs, is very similar to what happened to Wall Street in February/March 2020 when investors tried desperately to accurately discount the impact of the COVID-19 pandemic.

Normally, corrections in the market

The Trump Correction

It is relatively unusual for the activities of American presidents or what they say to have an impact on the New York Stock Exchange, especially during their first 100 days in office. Trump, however, is the exception. His confused, on-again, off-again rulings on tariffs have rattled the market. Markets hate uncertainty and even Trump himself doesn’t appear to know exactly

Dividends

Investors know that the return on a share is made up of a capital gain plus the dividend. Private investors are mostly attracted to the prospect of making a capital gain on the shares which they buy and do not often consider the dividends. What they perhaps do not realise is that a capital gain is actually just the dividend in a different form.