Exiting Corona Safely Financially by Jon Pedley
As countries across the globe start to lift lock-downs and relax restrictions there is the natural human impulse to do something to celebrate freedom, survival, hope and a future. Be careful!!
Firstly, my own opinion is that medically things are going to get a whole lot worse before they get better. Government management of the pandemic has been very, very poor nearly everywhere and I expect a large second wave of infections in UK, US and across much of Europe. In Uganda we are yet to see the first spike and there may be more restrictions ahead. We are certainly NOT home and dry. So financially I thought that it might be useful to put together a list of “do´s” and “don´ts” for our East African investors:
- Celebrate freedom by making any impulse purchases – you will regret it when you can´t drive it for another 8 weeks!
- Make any big decisions about investment in Uganda until at least the middle of August – by which time you may not want to
- Buy shares on US, UK or European exchanges – there is a big correction ahead
- Hold wealth in UGX – the Uganda Shilling is going to depreciate to at least 4100 before the end of 2021
- Invest in Ugandan rental property – however cheap it may appear, unless it is in a super-prime location
- Hold off any investment decisions for the next few weeks in Uganda – we are nowhere near the bottom of this market
- Stay as liquid as you can because there will be some amazing opportunities for those who are able to take advantage of them – cash is always king and especially now
- Move wealth outside Uganda if you can – URA is going to be very, very aggressive over the coming years and assets will be far safer off-shore
- Move UGX wealth into USD deposits and investments – as soon as possible
- Be ready to act quickly for the simplest and best opportunities caused by the pandemic – there are already bargains and fortune favours the brave
In terms of which asset classes to consider when it becomes safer to invest I think that over the next 5 years:
- Shares in the best companies operating in the worst industries are going to be very cheap – for example anything in travel and tourism that doesn´t fail is going to available at a very low cost post-correction
- Factoring or invoice discounting where you collect the cash that you lend a supplier direct from their buyer is going to be hugely profitable as people scrabble for operating capital
- Disruptive technologies – I wrote here [LINK TO LAST WEEK´S BLOG] about the opportunity to buy shares in a successful AI business at less than 12% of their current value
- Property will be problematic – demand will be low, yields will be poor, management will be time-consuming, and assets will be very illiquid
- Developer Finance – lending money to property developers in Europe has been very safe and very profitable: we don´t see that continuing for anyone except the distressed assets specialists
- Leveraged trading – whether Forex, Arbitrage or Commodities the level of uncertainty coupled with leveraged debt makes this far too risky a ride
I hope you found this useful. Stay safe from the virus by doing all the things you know you should…….and stay safe from financial loss by asking us advice about anything at any time – we´re here to help through Covid and the many years beyond. You can get in touch here.
Written by Jonathan Bennion-Pedley