Perspectives

Financial services representatives and their intermediaries often bring the same standardised solutions to individuals, regardless of personal differences. This approach is partly due to increased regulation and compliance requirements. However, each of us needs solutions tailored to our specific needs, as we are all unique.

During the 1960’s economist Milton Friedman made a statement that “inflation is always, and everywhere, a monetary phenomenon”. Since then, history has proven him to be correct. Growth in companies’ earnings, the long-term driver of the value of shareholders, is determined in part by economic growth as well as inflation. Along the same vein volatility, that is the ups and downs of economic cycles, is always and everywhere a phenomenon.

Big numbers may baffle you. Consider the following figures such as a million, billion or a trillion. How big are these numbers really? For example: A thousand seconds are roughly 30 minutes, but a million seconds are about 12 days. However, a billion seconds are 31.7 years. Yes, someone who turns 95 has lived 3 billion seconds and slept a 1/3 of that! Now a trillion seconds are 31 688 years! These very large numbers may become ludicrous.

Unfortunately we don’t always realise when we are making a mistake. When it comes to financial planning and investing, we might think we are
smart, but often we are not well informed enough. We really don’t know what we don’t know and perhaps we confirm our own biases.
The investment process is not a solvable problem – there is no magic formula.

How often do we ask ourselves where we are in terms of our personal milestones and financial goals? It is akin to prepare for a journey or road trip. At some point along the way you want to know if you have enough fuel and covered a distance in the right direction. What if you are on your way to Beaufort West in the Karoo, but end up 2½ hours later in Clanwilliam? How do we proverbially read our financial map and track progress?

I have been thinking about habits and routines for a while, its impact on our lives and potential progress as individuals mature. From childhood we are exposed to habits that ultimately shape our routines e.g. brushing our teeth, a breakfast routine and sleep time.

Might we see the demise of the United States Dollar (USD), or merely the end of another cycle in USDstrength? Since World War 2 (WW2) history has been littered with headline grabbing announcements calling the end of the mighty USD. Such calls are often accompanied by predictions of a total collapse of the stock markets and perhaps a return to a gold standard. Gold bullion sellers salivate at this topic.

Bill Gates said: “Most people overestimate what they can achieve in a year and underestimate what they can achieve in five, or ten years”. It hints at a potential behavioural error, thus ignoring the steady compound effect over several years. Often, during financial market uncertainty, we might believe we can do better by postponing a critical decision. The investment world is definitely more nuanced…

The idea has never been to write these letters with the intention to share news per se. We are constantly being bombarded with events and daily news updates. Per definition, we don’t want to share old news. Instead, we would like to share insights, or questions that may provoke thought or perspective on relevant financial matters. The material and opinions out there are vast. I’d like to think that we search for those timeless truths (if there is such a thing) that might help us craft our financial milestones and goals. In the words of Charlie Munger: “If it is trite, it is right”.

Some time ago I read an interesting article about how the US Navy Seals, akin to our South African “Recces” and perhaps other special forces, prepare and train. The Seals have a saying: "Get comfortable being uncomfortable". The theory is that if you can be comfortable being uncomfortable, you'll be prepared to handle whatever situation comes along in your own life. The mantra applies not only to the extreme physical conditions they endure, but also the situations.