Perspectives

During the last 50 years, South African equity returns exceeded the returns of bonds and cash by roughly 6% compounded per annum. This outperformance came with significant volatility; i.e. ups and downs in financial markets. There are periods where shares in listed companies will underperform bonds and cash, as has happened in South Africa during the last 3 years. In the long run however, stocks as well as listed property will outperform all other asset classes. Why then is it so difficult to hold on to these investments given the higher expected returns, especially if most of us have a longer investment horizon of 20, 30 or even 40 years? Read more >>
With this quarterly perspective, we would like to reflect on some major milestones of 2016. What it possible could mean for the near future and how do we intend to adjust our investment strategies, or not? Read more >>
“All man’s miseries derive from not being able to sit in a quiet room alone".  Blaise Pascal (19 June 1623 – 19 August 1662) was a French mathematician, physicist, inventor, writer and Christian philosopher. Truly a multi-faceted man; read more on the Web here.  Maybe philosophers are better than anyone else at sitting alone in quiet rooms (I suppose it is part of their job description). They read something; think about it while they stare out of windows. Perhaps there is a bit of finger-drumming or earlobe-pulling involved? Doing nothing is a kind of nightmare for most of us.  When we have no distractions, phones or iPads or books to read – we tend to fall into boredom very quickly. That for some of us hurts. This is an interesting issue, which doesn’t get much attention these days.  Some speculate that boredom is living in raw time, i.e. being in the moment, and feeling the full weight of mortality and the horrible passage of time. Read more >>
We enjoy advertising campaigns of fund managers and other financial institutions.  It is compressed, creative and entertaining.  For example a story about a blind doctor who cares for his patients (by Coronation); re-visiting the great Ali versus Foreman fight in Kinshasa (by Sanlam); re-uniting with a loved one after the fall of the Berlin wall (by Allan Gray).  We all could make an emotional connection with many of these stories, but what information do they provide us about the underlying investment(s) in order to help us decide if I should use or invest with them? Read more >>
By definition our future implies copious amounts of uncertainty. The uncertainty principle (and probability) is one of the foundations in quantum physics. It basically says that not all properties of a quantum particle can be measured with unlimited accuracy.  Our macro world and South Africa in particular is uncertain. Consider the influx of immigrants into Europe and a turbulent election process in the United States. Nothing can really make our future more certain – there is no remedy for uncertainty.  Generations have always had to deal with degrees of uncertainty, right?  And at times when things seem to be certain, it isn’t… Read more >>
Our world offers us too many choices and often individuals struggle to exercise an option. It becomes a problem when you need to make an informed decision quickly and you don’t have the time. I recently kicked off a small DIY project and finally decided to buy that cordless drill I always wanted. To my surprise, the decision wasn’t that easy. Apart from poorly trained staff (no one in the hardware stores could guide me and I was forced to do my own research on the Internet), the information on drills and models were overwhelming – to say the least. Choices varied between brands, drill sizes, cordless types, voltage, gear ratios, hammer action etc. From all these thousands of models, it wasn’t straightforward. How do I select a drill that suited all my needs? And I don’t know what I need! Read more >>
During the cold war in the 1960’s, NASA constructed a special “space pen” in order to overcome the problem of a normal pen that would not write in space as the ink rolled backwards. It cost them hundreds of thousands of dollars in R&D.  The Russians used a pencil… Read more >>
This issue explores financial advice, its perceived or potential value and what a person [seeking financial advice] perhaps should look for. The service level for example of any type of consultation rendered (lawyers, doctors etc.) is often difficult to quantify. How good, or of what quality, was the service rendered? Isn’t it often based on an experience rather than a measured result? How do you measure a good outcome compared to the perceived value of a product (a tangible item), e.g. a smart phone, piece of art or antique furniture? Are we more prone to look at what it costs? As the saying goes: “Nowadays we know the price of everything, and the value of nothing”. Read more >>
In this issue we share a letter from Jurie Gouwsventer.  Jurie has been working with us for some time.  His practice Mindfulmoney is also part of our independent association with Finsolnet. Amongst others it is a platform where we exchange knowledge and ideas. In this way we avoid a situation where decisions are made in isolation.  You are welcome to peruse his webpage at www.mindfulmoney.co.za. Read more >>
A few thoughts by Cobus Rysbergen:  I recently found myself in the (un)fortunate position where I wanted and needed to do some renovation and maintenance work to my house. The project was not without frustration, but it was interesting to note how certain of the difficulties that were encountered, could relate to the field of financial planning. Here are some examples:   Read more >>
“The Drunkard's Walk: How Randomness Rules Our Lives” is faintly reminiscent to the Black Swan, written by Nassim Taleb. The author illustrated how very low probability events [highly unlikely] could have a high, or material impact around you. Although in my view a fatalistic approach to a world-view, Leonard Mlodinow, the author of The Drunkard's Walk, offered insightful comments to relevant examples. There are examples from sport, medicine, psychology, as well as the stock market. Leonard Mlodinow (also being a contributing writer to the classic McGyver series) does an excellent job in driving home the fact that, the true probability of events cannot be established intuitively; i.e. you really cannot accurately calculate or foresee a particular outcome. We mistakenly think we notice patterns, which permits us to make predictions – pure illusions of patterns and patterns of illusions (also a chapter in the book). Humans tend to struggle in order to distinguish between luck (or being unlucky), versus some kind of skill, or the lack thereof.  By the way, thank you Gary Larson for the cartoon. Read more >>
Part of a recent medical check-up was an EKG, or electrocardiogram. For those of us who don’t know what an EKG is, it is a way to measure the electrical activity of your heart over a defined period of time.  It picks up electrical impulses generated by the polarization and depolarization of cardiac tissue and translates into a visual waveform. The waveform is then used to measure the rate and regularity of heartbeats, or the presence of any damage to the heart. Not so much of an epiphany, but what struck me about our heart rate is the waveform; a regular up and down movement, that implies life. Change implies movement whether up, down left or right.  Ironically humans don’t deal very well with change. In the financial world central banks try to keep inflation intact, currencies stable and financial markets from collapse.  This does not mean life, because if your heart rate flat lines, you are dead. Read more >>
The disappearance of Malaysian Airlines flight MH370 left the aviation industry baffled and authorities without answers. The incident prompted the analogy of a pilot and aeroplane to describe the various roles during the investment and advisory process.  Bear with the example for a moment. A particular version proposed that an aircraft is being flown and guided by the asset or investment manager, the client being the passenger, while the advisor performs the role of a steward. This could lead to an interesting discussion, because sometimes we might get the roles mixed up. Read more >>
No one could have thought that global financial markets would deliver such returns over the previous 12 months. Time and again economists and pundits claimed severe uncertainty coupled with more speculation. This injected fear with the layman investor. What are our conclusions?  We don’t know what is going to happen; we can only manage uncertainty to some degree.  Plus, we don’t need to worry too much about the daily news flow.  It is for the most part utter noise.   Once again, being part of the market (through its various cycles), has proved to be a better strategy than trying to time it; i.e. waiting for the perfect exit or entry point.  Those individuals, who “read” too much into the financial markets, were eventually caught on the sideline while the JSE All Share Index slowly crept up, well above its historical highs since the 2008/2009 financial crisis with a roughly 20% return per annum.   Read more >>
From time to time I follow commentary by Carl Richards of The Behavior Gap.  He regularly questions conventional wisdom and has some insightful and very practical comments to the layman investor.   I took some thoughts from a recent letter which discussed our human bias towards taking action; i.e. we need to continually do something in order for something else to work.  He discovered a study that explored the success, or hit rate of elite soccer goalkeepers during a penalty shoot out.  The results were astounding.  You can download the study which was also published in the Journal of Economic Psychology here.  The notion was simple; that if goalkeepers just stood there and do nothing, they would be much better off. Read more >>

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