Tag Archive: investing

Weekly Thoughts 31 May 2019

There was a man who bought a flat to rent for R100 000. The purpose was for rental income to help him out at retirement in years to come. The next month there was a similar flat in the same complex selling for R85 000. He decided not to buy it, even though he had the money and would get the same rent. Three months later they were selling for R110 000. So he bought another one. Got the same rent. Four months later they were selling for R125 000, so he rushed off to buy another. Got the same rent. A further two months later, one was selling for R91 000, but he didn’t buy this one. He preferred buying them when they were more expensive than his last purchase.

This analogy to investing popped into my head this past week, while pondering investor behavior and how many investors deal with value, wishing for it to go up before investing.

Weekly Thoughts 02 June 2017

I believe that predominantly the investment industry panders to the greed of companies and individuals. The term ‘good’ is usually used where one company is producing better returns than another. Returns as in growth of capital value, not necessarily for anything else that an investment might do for you.

This process would involve the ability to constantly buy shares cheaply and sell when expensive. Which in and of itself is fine and potentially correct for the function of growth not income. But the process needs someone else to be on the ‘other’ side, someone to have bought expensive and sold cheap. Because otherwise there are no shares to trade at those points in time. Like you cannot sell your house when you think the price is good if there is not someone else around to buy for why…. in the season when you’re thinking it is time to sell? This investment process is simply a transfer of wealth from one person to another. Winners gain at the expense of losers. Which no-one will mind as long as they are the winner. That is the nature of the human species.

The buying and selling of investments, or trading, happens all too often in the investment industry. I often, often, hear my investment consultants talking about how advisers, or the clients themselves, switch funds at poor times and often change their entire portfolios during one year. This is not investing. This process could be called speculating. Indeed, it was refreshing to hear an Investec Fund Manager when presenting in Durban in March this year, only talk about the 10 and 20 year value growth figures of his fund. We should not be looking at 3 months, 6 months, 12 months, 2 years or even 3 years. Then we’re investing for the wrong reasons.

Weekly Thoughts 26 May 2017

Last week in my first mail around the topic of ‘Mechanics of Investing’, I said there was basically two forms or types of investing: Debt or Equity. Lending your money out or buying something to own. This week and next week I am going to write just a paragraph on the philosophy, the ethic, of investing. Thereafter I will write another more technical letter.

Saving and investing, could be seen as the simple process of deferring gratification now, in order to receive a benefit of sorts in the future that is rightfully yours. No more and no less. It could be seen as giving your savings, earnings, disposable cash, to an enterprise that serves you (society) honestly. Thereafter receiving a regular and fair cash payment, or growth in value, in return for doing this.

This simple statement could be the foundation, or the defining truth, of investing. However, I don’t think it is found among the industry’s conventional wisdoms.

My long weekend away last week in the Lesotho mountains comprising 20 off-road motorbikes with 5 support vehicles and trailers, was made up of an odd-ball posse of a sprinkling of youngsters in their 20s and then predominantly the 50+ brigade. We traversed some of the most remote and challenging passed, drove through the week’s old snow, forded rivers and travelled numerous other long stretches of road making up a 650km trip. Many a road-side stop and fire-side conversation was had. Two stood out for me, conversations that are rare opportunities.

I had the opportunity to meet a Chief Financial Officer from Coca Cola, who is the CFO for the greater Middle East region. He came out specifically to join this trip. We struck a cord and had long conversations. Consumers, products, migration, rates of population growth and decline, predicted population changes over the next 200 years….. and so on.

Then I also met and chatted with the head of the African expansion program of a listed company that handles product delivery for numerous companies. They ensure that the product you want to buy at many a restaurant or retailer is there on time. I asked about trucking logistics, price margins, profitability, the consequence of a truck sitting at a border post for 48 hours, 24/7 operation problems, why the chosen African countries were chosen…. etc.

Really good to talk to people working in such senior positions in listed companies that the fund managers I use look at to buy. I learn a bit about the far side of things. Otherwise simply a privilege to be up and out in a beautiful landscape.

See Picture in Things of Interest.

Weekly Thoughts 12 May 2017

On and off over the next few weeks I am going to write bits and pieces that together covers something we’ll call the ‘Mechanics of Investing’. This all for the purpose of making some things seem simpler.

Investing could be seen as committing your money to somewhere with the expectation of future returns. Returns in the form of what? There are many different views or expectations or understandings of this point.

There are really only two forms of investments: debt or equity.

Debt is where you lend your money out. This could be to a bank in the form of deposits – savings accounts, money market accounts – and then you earn income in the form of interest, or you lend it to governments or corporations in the form of bonds and also get paid back through earning interest.

Equity means you are buying into an enterprise, into a company, through listed shares on stock markets, either directly or through unit trust funds. Here you share in the profits and growth of the company and you might also earn income called dividends.

That’s it for this week.