Saturday, 8 June 2019

The Four

I am reading The Four by Scott Galloway. I have read the first half which tells the story of Amazon, Apple, Facebook and Google. There is no doubt that these four companies have shaped the world over the last 20 years.

Should you own these in your portfolio? I think so (my opinion - do your own research). Sure, they sit on lofty multiples. For example, Amazon sits on a trailing 75x PE ratio. Yes, it has to shoot the lights out. It has to change the world. So far, it has done exactly that.

But guess what? I also own stocks such as Walmart. An old dinosaur to many.

Investing is about constructing a portfolio. Far too often we only talk about the stocks we should buy. A handful. A proper investment portfolio has more than a handful of stocks. A good investment portfolio should survive the multiple different futures.

I truly believe "The Four" will grow more powerful and continue to change the world. I could be wrong though and my investment portfolio takes this into account. The companies of tomorrow could actually be resurgent old dinosaurs or companies that haven't been founded yet. My point is that I have exposure to all of them.

I am not trying to have the best investment portfolio. I just want one that will grow a few percentage points ahead of inflation and one that will be around in 30 years time.

I'll leave the bold calls to the "pro's"...

Image result for the four book cover image

Tuesday, 4 June 2019

Back with a...

I am been very quiet. Truth is that I haven't really had much to write. This is probably due to a combination of laziness and being busy on other projects. Well, I am back now. Certainly not with a bang...

I spent the weekend at the Cape Town Coffee Festival. One of my businesses (RECUP South Africa) hired a stand and presented South Africa's first coffee cup exchange programme. The company's goal is to rid the world of single use coffee cups. I was overwhelmed by the support we received. People are certainly very conscious of the environmental impact of their coffee consumption.

With all the negativity in South Africa at the moment, it was refreshing to spend the weekend at such an awesome event.

Onto investing. Even though we got a shocking GDP number today, we shouldn't deviate from our plan. Why? Because your plan should withstand shocks such as poor GDP numbers. This means your investment portfolio shouldn't be reliant on any one country, market, company and/or industry.

As always, here is a guideline for your plan:
  • Invest your money in real assets (property, shares etc - if South Africa goes south, ZAR cash isn't going to worth very much. I feel real assets have a better chance of maintaining purchasing power.)
  • Build an offshore store of wealth or investment portfolio (heck, if you want to leave, it can be the start of you saving towards one of those Visa's you can buy in some European countries)
  • Have access to offshore cash in hard currency (USD, EUR or GBP). If you need to get on a plane then you have some rent and food money.
  • Start meditating (I am serious). Learn to deal with stress/anger that uncertainty in South Africa is causing you.
  • Lastly, on a sunny African day go for a walk on the promenade at your nearest beach and wonder is it all really that bad...
PS: I wrote this post on a Chromebook. This is Google's operating system. I am a proud Microsoft shareholder but always trying new tech!

Thursday, 28 March 2019

Wrong objective

I was an asset manager trying to beat the market. I learned over time that this was a pointless task. Surely, investors have an objective in mind and a portfolio should be aligned to this objective. Asset managers (active ones, in particular) don't care about investor objectives. The simply want to earn the highest return. This attitude is evident in the standard active manager defense of active investing. Namely, active managers give the usual "you are guaranteed to earn below average returns with passive" and "active gives you a chance to earn above average returns" arguments. I don't buy it.

I read a great article by Craig Gradidge which talks about these defenses. Craig is a financial planner I follow and admire. He calls it like he sees it. His article is aptly titled "How active managers convinced me to invest more in passive funds" and tells the story of the flimsiness of many active managers defenses helped to include more passive portfolios in his client portfolios. In fact, Craig uses both active and passive in client portfolios.

Craig succinctly sums up his views in the last paragraph of his article (text bolded by me):
"The reason active managers convinced me that I needed to increase my clients’ exposure to passive investments going forward, is that it has become clear to me that they do not fully understand my role as a financial adviser. Their responses to the debate were to play down everything that is important to me and my clients; building robust portfolios at a good price in order to achieve clearly defined investment objectives. Active AND passive funds can help us achieve that. No client has ever asked me to outperform the market. They almost always ask how much their investment portfolio will cost."
I could never understand why so many very clever people with lots of Bloomberg screens (portfolio managers and analysts) could never deliver outcomes desired by clients. It's the old client vs fund return argument. The fact that I now understand these clever people are chasing a different objective, makes things a little clearer.

Image result for clever asset manager

Sunday, 10 March 2019

Does the election matter?

I hate election years. Politicians spew more nonsense than usual (as if that is possible). I hope May comes as soon as possible so we can move on with our lives.

The question I want to ask is: Does the election matter? Will anything change? Or will government continue to do what it does best... pretty much nothing. Other than a certain red party gaining a majority one day, I don't think the election does matter. The ruling party will probably continue tripping itself up. The blue party will continue to blame everyone except themselves. The red party will continue to be angry and talk rubbish on social media.

We are not unique. The UK politicians screwed up Brexit and the US president is a mad man. Even the "Saffa safe haven" (Australia) has a new prime minister every other year. My point is politicians and politics are net value destroyers.

Ok. Yes, politicians are my least favourite people but this post is not really about them.

Going back to whether elections matter now. I think if you build or have to change your financial based on what happens in May, you need to have a hard look at your plan. A short term event should not put your entire plan at risk. Repeat after me. This election in May should not cripple my investment portfolio. I'll remind you why:

  • Invest your money in real assets (property, shares etc - if South Africa goes south, ZAR cash isn't going to worth very much. I feel real assets have a better chance of maintaining purchasing power.)
  • Build an offshore store of wealth or investment portfolio (heck, if you want to leave, it can be the start of you saving towards one of those Visa's you can buy in some European countries)
  • Have access to offshore cash in hard currency (USD, EUR or GBP). If you need to get on a plane then you have some rent and food money.
  • Start meditating (I am serious). Learn to deal with stress/anger that uncertainty in South Africa is causing you.
  • Lastly, on a sunny African day go for a walk on the promenade at your nearest beach and wonder is it all really that bad...

Image result for election voting box pictures

Thursday, 28 February 2019

Does Size Matter?

Big or small? That is the question. Let me explain...

Once upon a time in the land of financial blogging experts, Sir Henry Save-a-lot proclaimed that if we focus on not over spending on the big items (cars, houses etc) then we will be on the road to financial freedom. On the other hand, Sir Harold Save-some-more thinks if you forgo your daily coffee and get rid of the small unnecessary expenses then you will experience this magical thing called financial independence.

I read a few personal finance blogs and usually the blogger is in one of the camps above. I don't agree with either. For me it doesn't really matter. Quite simply, spend less than you earn. Sounds simple enough but very few of us do it. I try do it every month and it is very difficult. Lately, I haven't been very successful. It is the usual story. I am married with a kid with more kids to follow at some stage. It certainly makes it difficult but we all have challenges in life. We have to do better.

Here is my list of no-no's:

  • Buying a house you can't afford (big thing)
  • Buying a car you can't afford (big thing)
  • Sending your kid to a school you can't afford (big thing)
  • Eating only at fancy restaurants (small thing)
  • Using retail store credit unless absolutely essential. Do you really need those jeans? Or can they wait until next month (small thing)
  • Trying to keep up with the Joneses (big and small)
  • Buying any of or all of the above and then having nothing left for your savings

Monthly Income = Consumption + Savings 

So, spend less than earn. Repeat that every day. If you find it difficult, look where you are spend money now. Use an app like 22seven if you have to. We often have more wriggle room than we think. Necessities are far often only wants.

And let me be clear. You don't need to be a scrooge. Spend money! Go on holiday! Experience life! Just don't spend more than earn.

What do you think? Are you in the big or small camp or a bit of both?

Image result for expensive car  bmw

Tuesday, 19 February 2019

Run for Cover: My Budget Predictions

Our future hinges on tomorrow. The world will end if the Minister Mboweni's budget does not meet expectations of experts at Investec, Deutsche Bank, Goldman Sachs and [Insert big bank name here]. What will we do? Oh, how will we survive?

Got ya...  moving on. I can only write so much drivel.

While some may worry about how big the bailout is for SAA or how much funding Eskom needs, I prefer to focus on what I believe matters. Sure, Eskom imploding will be catastrophic but if your entire investment portfolio is destroyed because Eskom implodes, it is not Eskom that is the problem.

You see, we invest for multiple futures. We don't know which future will happen ahead of time. The trick is not to bet on any one future. Yes, you will look like a rock-star if you put everything you own into one possible future but you'll end up the street in all other futures. Personally, I'd like to put my odds in favour of avoiding the street.

So when the bad news comes tomorrow, sit back and repeat after me "Is my investment portfolio positioned correctly?". This means:

  • Exposure to majority real (or growth) assets (think shares, property)
  • A small cash buffer to get you through hard times
  • An appropriate exposure to offshore assets to protect yourself from all that state capture and land expropriation noise
Have a plan and then the noise remains just noise.

Image result for zuma laughing

Tuesday, 12 February 2019

Forget hashtags. Accept reality.

Loadshedding. A dreaded word for all of us. I have no opinion on what got us into this mess. As far as I am concerned, all politicians are crooked and centralised government is a pretty terrible idea. An even worse idea is the creation of State-owned entities. I am going to leave it there and change course.

We need to accept our reality. Things suck sometimes. Deal with it. There are many things that are a mess in South Africa. And it is driving people crazy. I get a bit of a kick from browsing social media. Hello, people... venting your anger with the hashtag #EskomLoadshedding is not magically going turn the lights on. Maybe I am bit twisted but your anger is a source of entertainment for me.

So what should you do? First, decide whether you want to be here. If you don't, make a plan to get out of here. Simple choice. Stay or leave. (and please don't say some people don't have a choice... there is always a choice!)

If you decide to stay then stop complaining. Don't be naive, though. Take active steps to protect yourself.

  • Invest your money in real assets (property, shares etc - if South Africa goes south, ZAR cash isn't going to worth very much. I feel real assets have a better chance of maintaining purchasing power.)
  • Build an offshore store of wealth or investment portfolio (heck, if you want to leave, it can be the start of you saving towards one of those Visa's you can buy in some European countries)
  • Have access to offshore cash in hard currency (USD, EUR or GBP). If you need to get on a plane then you have some rent and food money.
  • Start meditating (I am serious). Learn to deal with stress/anger that uncertainty in South Africa is causing you.
  • Lastly, on a sunny African day go for a walk on the promenade at your nearest beach and wonder is it all really that bad...

Saturday, 9 February 2019

Action over inaction

I read a lot. I know, I have told you that 15 effing times. Like a broken record. I read everything. Any genre (except horror because I get nightmares!).

Reading is great because it exposes you many new ideas. Autobiographies are especially great as they let you into the mind of an individual. I even read my fair share of self-help. Some constructive feedback to the authors I have had the pleasure of reading... I find most books tell us only about the romance. Like a relationship, there is more to every story than just the romantic part. After reading books, everything seems so easy. If I just do x, y will happen. Well, life ain't like that.

The best way to do anything is to actually do it. Want to be an entrepreneur? Start a business. Want to be a small business owner? Buy a small business. Want to be an investor? Start a portfolio.

We can always find excuses not to do any of the above. We wait for the stars to align and then we will get going. The problem is the stars never align perfectly. We also want to be taught.The best way to be taught, is to do.

So, instead of signing up to these annoying masterclasses that keep popping up on Facebook where you can learn how to run a business like Howard Schultz (Starbucks), save your money and put it into an investment portfolio.

I know a number of people who are in their mid-thirties and don't have an investment portfolio. Others only have one by default due to employment and they don't know much about it. Unfortunately, company pensions will probably not be enough to sustain you when you retire.

Don't make this mistake. Start small and build up your portfolio over time. Good luck!

Image result for self help books image

Wednesday, 30 January 2019


As an investor, the least of my concerns is how much a Gigabyte of data costs. I can't believe how much stock exchange operators and data providers are able to charge for share price and stock exchange data.

My small brain can't comprehend how the JSE "owns" the closing price of AVI or any other listed company. Why do I have to pay them a fee for these prices. As shareholder, it is my right to use the share price of my own company as I see fit (I also don't understand how someone can own a sports fixture list... but that is for another day). The price of a company is the price of company. It is a fact. Imagine if I couldn't publish that the sky is blue.

Yes, I know the JSE infrastructure is expensive but they charge hefty listing fees. The model needs to change. Models changed in other industries. Just ask Multichoice about streaming.

In my opinion, it is the private investor who suffers. I can't afford a Bloomberg terminal (or any of the less expensive options). I propose data should be free. At least, delayed data should be free. Heck, give me end of day data free!

At the very minimum:

  • End of day closing price data
  • SENS data (this the JSE news service - companies are compelled to use this service to communicate with their shareholders and yet you have to pay for it... ok, I am not being fair. You can get something like the last 7 days free on a financial news website. Archives? Fat chance.)
Without price data, it is very difficult to calculate the performance of a portfolio. I already have to manually record all dividends! 

So this post is actually a plea... if anyone out there has a relatively inexpensive I am all ears. I am not looking for those funny overpriced Sharemagic-like trading systems. I just want to be able to access this data in a csv or excel file that is automatically sent to me daily. 

PS: forgive me for the moan :)

Image result for share price data images

Monday, 28 January 2019

Certainty is for the mediocre

"Think about the most meaningful thing you have ever done. I would wager that it took a measure of risk, uncertainty and hard work to achieve. In this, as with all risk, comes a valuable lesson: to strive for certainty is to doom oneself to mediocrity."

This applies to many areas of life but especially investing. When we invest we crave certainty. We want to know the whichever shares we buy will definitely without shadow of a doubt "go up". And they must go up in a straight line. So when this doesn't happen and share prices jump around, we panic and do stupid things (like liquidating and holding on to cash... just waiting to catch the bottom of the market). We must embrace uncertainty... even celebrate it.

I am trying not to be a groupie but the Behavioural Investor sure has some wise words in it!

Here is the rest of Daniel Crosby's favourite paragraph in his book:

Here is the original tweet.

Wednesday, 23 January 2019

How Dan Manages His Cash Flow

It took me a while to realise that psychology is most important when it comes to wealth creation. So much for fancy excel spreadsheets, complicated models with discounted cash flows and, dare I say it, forecasts.

Dan Egan is a behavioural scientist. He is darn good one too as he is the Managing Director of Behavioral Finance & Investing at Betterment. He wrote a cool blog post on how he manages his monthly cash flow.

Personally, I use 22seven but it can get quite tedious. You have to be disciplined to ensure all your expenses go into the right categories. I am lucky that I don't mind doing but most people find it a pain. Dan doesn't use categories and he spends anything that he hasn't earmarked for saving. He is kind enough to share his method in the following blog post:

In case time is short. Dan sums his method as follows:

- Spend what you don't save
- Earmark and automate
- Minimize overhead
- Vaccinate against lifestyle creep

Sunday, 20 January 2019

Doing the reps

One of my favourite bloggers is Ben Carlson from Ritholtz Wealth. I really enjoyed his post about doing the hard yards. He sums it up best:

There’s no singular path to success in any endeavor so my advice to anyone looking to further themselves is to put in the reps, even when they seem meaningless.
If you want to become a writer, start writing every single day, even if it’s terrible.
If you want to become a better investor, start reading about the markets, and put some actual money to work.
If you want to work in a specific company, start out as an unpaid intern or figure out how to provide value to someone who already works there.
If you want to become an entrepreneur, quit reading hashtags on Instagram and actually try to start a business or sell a product.
If you want to become something or someone you have to put in the reps.
There are no shortcuts.

It made me think about investing and business. How many people do you know talk about how they need to start investing or tell you about their big idea but do nothing about it. If they do anything it usually involves getting a logo designed and renting office space. They forget about the hard work that needs to be done (i.e. selling a product or service).

So if you still don't have an investment portfolio. Get off your ass, open a trading account (EasyEquities is a good one), start reading and put some money to work. Time to make it happen.

Image result for putting in the hard yards

Tuesday, 15 January 2019

Wild man and markets

I recently finished Daniel Crosby's Behavioral Investor. It was a great read. I especially enjoyed the first half which talked more about us humans and our brains than anything to do with stocks and bonds.

The first chapter is titled Sociology. According to Google, sociology is defined as the study of the development, structure, and functioning of human society. I haven't come across to many investment books that talk about sociology.

Our ability to create social narratives distinguish us from the rest of the animal kingdom. What on earth does that mean? In short, humans like stories. As Crosby puts it, "To put it bluntly, we make up stories about the world and then act as if they are real:" This has enabled us to create many things such as money, laws, country borders, the stock market and so on. None of this stuff is "real". Crosby sums it up well, "our shared belief in them and behaving as though they are real brings about orderly civilizations steeped in mutual trust."

It is this unique ability that causes us to make very poor investing decisions. Because of our "complex" thoughts we are victim to self-deception and irrationality. We follow popular opinion and belief. We want to fit and/or boost our egos. Think about it... You have argument with someone and you are in possession of facts that completely destroy their hypothesis. Often this will not change that someone's mind. We remark in jest that "facts are obviously optional". Your opponent either doesn't want to look bad by conceding the argument or they simply ignore the facts as they contradict a widely held belief (even if that belief is obviously false!).

So to sum it up in easy to understand terms. We suck at investing. Why? Our brains are wired to reason in social rather objective terms (see paragraph above). Therefore, before we even think about investing we need to understand human nature.

In the chapters that follow, Crosby shows us how to go about this but those ideas will be for another blog post. I have also included a link to the book below. It is worth buying. (It is not some silly affiliate link or anything like that).

(As an aside, after reading this book I think I was able to explain how Donald Trump made it to the White House...)

Wednesday, 9 January 2019


Drama. Plenty of it. Woolworths (or "Woolworse") has cribbed someone's product design. Ouch. The evidence is damning and Woolworths have pulled the product from its shelves. They will then wait it out until people get over it. Life will go on.

As a Woolworths shareholder and SME owner, I am pretty disappointed. I expect better. Woolworths lives behind this squeaky clean ethical image. Of course, people make mistakes and in this case, there was no doubt a couple of individuals who decided to rip off a product. I am sure there were some nice corporate bonuses involved too.

There is a point to all this. If we look at the investment universe that is available to us, we have two choices we either invest in companies that we don't always agree with or we invest in nothing and put our money under a mattress. We sacrifice some of our beliefs to ensure we don't end up on the street one day. People who view the world in black and white have a hard time living with this. There are many shades of grey in this world.

So yes, we own companies such as Anheuser-Busch, Imperial Tobacco, British American Tobacco... heck some would even argue Facebook is one of these "evil companies" now.

The way I deal with the "guilt" is by supporting causes that are close to my heart. For example, we have just launched a reusable coffee cup exchange in South Africa. In short, I believe that you should focus on sorting out your retirement etc at a macro level then make a difference in the world at a micro level. I believe that over time as more and more of us make small changes in our lifes, over the long term companies would need to adapt. And since I am an investor, I love the long term.

What about you? Has this ever crossed your mind?

Monday, 7 January 2019

Talking Coffee

I have an interest in a coffee roasting company. Long story short, the team there found out that I blog about investing and have made a writing comeback. They then asked me if I ever wrote about them and I must admit I had never thought about it before. The reality is the business is part of my investment portfolio. Tonight, I thought I could do two things:

  1. Finally acknowledge the coffee team
  2. Relate a few quick lessons about non-listed investments I have learn't
I remember my varsity days. We were all going to have our businesses. We were going to do what we wanted and work on our own terms- conquer the world. We all graduated and reality set in. We got jobs. 

Ironically, having your own business is anything but getting to do what you want or working on your own terms. It is not for everyone but it can still be fun. I am fortunate enough to have exposure to consulting, small private company investments and listed investments. So what's different?

In my experience:
  • Private companies trade on much lower multiples than listed companies (basically, R1 income in a small private company is usually worth less than R1 in a large listed company)
  • I was used to working with degree'ed individuals and a lot of CA/CFA types (who are great too :) ). It has been a breath of fresh air working with people from diverse backgrounds. We have really colourful characters that include a trainee pilot, a musician and an actor to name a few
  • Small private companies are much more management intensive. Even though I have a non-operational role in the business, I find that I spend more time on my private investments than looking at MTN or AVI shares. On the coffee side, I have a passion for coffee so often it doesn't even feel like work.
  • Being involved in running a small business means you need to consider everything. You are the lawyer, the accountant, the strategist and so on. Everything is just on a smaller scale. I feel like I have picked up some great general business skills that are applicable to listed investing.
Should you rush out and start/buy a private company? Only you can answer that. The same rules apply, though. You need to ask:
  • Will a private investment add value to my portfolio?
  • Will it diversity my income stream?
  • Do I have enough time to run/monitor it?
  • Do I have/need good business partners I can trust?
For me, I have been able to get involved in some great businesses and work with some awesome people. It is a welcome challenge. In particular, the coffee roasting business is in an industry that I love. 

Wednesday, 2 January 2019

The One Stock to Buy in 2019

Looking for the best share to buy in 2019? Look no further...

Nah, only kidding (Sorry for the clickbait :) ). Who would write such rubbish... ahem, nearly every financial publication in the world. Look, they need to sell news somehow and we love shortcuts. Wouldn't it be awesome, if we could just buy one company and make a ton of money? Be my guest. You may get lucky but don't count on it.

I have no idea what 2019 will hold. If I had my way, there would be a new president in the White House and there would be no Brexit. So instead creating a "Top 3 Companies to Invest in 2019" list, I have created a list of financial affairs things to do this year. Here are some ideas:

  • Start a tax free savings account using low-cost products (You can do so at EasyEquities)
  • Review the fees you are paying your financial adviser
  • Make a list of books to read (investment and other)
  • Set up monthly debit orders for discretionary savings and investments
  • Cut unnecessary subscriptions (unused gym contracts, DSTV etc)
  • Don't buy a new car if it is "paid off" in 2019
  • Plan a holiday with your family (do it now so you can save and budget)
  • And most importantly, learn to live a little below your means... don't be one financial crisis from ruin
Some of you may already have done some of the above. Well done if you have. Can you think of any others?