Perspectives

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.

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.

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…

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?

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.

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:
 

“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.

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.

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.

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.