On the 13th of October 2000, I was standing at the end of a jetty on a lake high up in the Drakensberg selling my clients’ Dimension Data shares. I remember the day because it was my 10th wedding anniversary. My husband and I had gone to a remote guest house to celebrate – the jetty was the only place where I could find a signal. For a reason I cannot recall, selling Dimension Data shares became urgent enough to interrupt my wedding anniversary.
Dimension Data was the darling of the stock exchange at the time. It had enjoyed a meteoric rise, in anticipation of the ‘new economy’ of which IT was going to be the central driving force.
For a while, we were unpopular for selling some of our clients’ favourite shares. But then the Dot.com bubble burst. The share price declined by 97% before it stabilised.
Many people said that a long-term view would fix everything – they could just hold their shares and eventually it would come right again. The dot.com bubble was my first taste of what it could be like when the long-term does not fix a problem. I learnt that the long-term cannot fix poor business models or having overpaid for an investment. Also, the long-term doesn’t fix the world having changed.
For Dimension Data, the world had changed at the time – their market became overcrowded and the hype of Y2K and Dot.com burst. After restructuring, the company survived, radically altered. The share price never recovered to much more than a fraction of its previous lofty levels. They went on to delist the company from the stock exchange.
When the Great Lockdown struck the world economy, I thought of that time – the end of the 1990s. For many industries, the long-term will not fix the problem. The lockdown has accelerated certain inevitable trends. Think of work-from-home, online retail or travel – after the lockdown, we will not go back to how we worked and shopped before and there may be a greater reluctance to travel.
The long-term may not fix the aviation industry or the conference industry, or it may be several decades before the capacity in the South African property sector is utilised again.
This may sound obvious. Our asset managers are already taking this into account in our clients’ investment portfolios. However, it is at the personal level, where this will be painful. It may mean that you must change your career. It may mean that you must concede that certain personal investments will never recover. It may mean that you must close your business. It may mean that you will have to cash in your retirement funds to survive.
The sooner you adjust, the better. The longer you hold out, the more likely it is that you will only deepen your troubles. You may have to draw a line below your losses. You may have to move on.
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