The Lighthouse Issue 5

the
lighthouse
Issue 5 | October 2012
welcome
The end of the year is
imminent and now is the
time to check that all
your affairs are in order
before the holiday
season begins insurance, security and
financial documents.
Making sure that these
are all in place and upto-date means that you
can enjoy the festive
season with peace of
mind. Even better, you
can start the new year
confident that you're
prepared for whatever
the year may throw your
way!
Enjoy the read.
Listen Up!
There's a commonly used word that we all know and apply
daily, but how many of us do it properly? The word is 'listen'
and it's something we may think we are doing right, but the
reality is that instead of being 'all ears', many of us only 'listen
with half an ear'. However, everyone knows 'good listeners' and
these people generally also have good emotional intelligence.
Emotional intelligence (or emotional quotient, or EQ) is the
ability to identify, assess and control the emotions of oneself,
others and groups. While its earliest roots can be traced to
Charles Darwin's work on the importance of emotional expression
for survival and adaptation*, it is only in the last decade or so
that EQ has hit the mainstream. There has been widespread
acknowledgement of the role it plays in relationships and the
fact that people with good EQ are good listeners. This is exactly
what Stephen R. Covey emphasises in Habit Five in his book,
'The Seven Habits of Highly Effective People'** - 'Seek first to
understand and then to be understood.'
According to Covey, “If you're like most people, you probably
seek first to be understood; you want to get your point across.
And in doing so, you may ignore the other person completely,
continued over the page
www.stonewealthmanagement.co.za | 1
pretend that you're listening, selectively
hear only certain parts of the conversation
or attentively focus on only the words
being said, but miss the meaning entirely.
This is because most people listen with
the intent to reply, not to understand.”
Covey uses the analogy 'diagnose before
you prescribe' and says that this is a simple,
effective and essential way to develop and
maintain positive relationships in all aspects
of life. It's obvious that you can't effectively
diagnose if you don't listen properly.
Linda Stonier, Stone Wealth Management
CEO and Head of Advice, agrees. She says,
“This is also an integral part of our business
model. At Stone Wealth Management,
before we finalise your financial plan, we
collect and collate your financial
information to establish realistic financial
goals. We then analyse your circumstances
so that your financial plan will suit your
lifestyle. Only then do we provide advice
and make recommendations. Listening to
your needs is what ensures that we get
your solution right.'
Listen with empathy to what you are
hearing, and you will reap the benefits in
every aspect of your life.
* EQ: http://en.wikipedia.org/wiki/
Emotional_intelligence
** In 'The Seven Habits of Highly Effective
People', Covey presents a seven-part model
for effective performance in business and
personal life.
2 | a professional approach to preparing your future
Economic and Market
Overview: Quarter 3, 2012
For the period ended September 2012
The following market review looks at the
performance over the past quarter of local
and global asset classes, as well as currencies,
and puts this into perspective relative to longerterm performance. The purpose of this review
is to provide a context in which the performance
of the investment solutions in which you are
invested can be assessed.
International
The past quarter has been marked by a series
of announcements on monetary stimulus
programmes, or the expansion thereof. This has
been in an effort to boost sluggish global
economic growth, with several developed
countries struggling to grow their economies
at satisfactory levels. The US has maintained
positive economic growth, but only grew at
an annualised rate of 1.5% in the second quarter.
This has not been sufficient to lower the
unemployment rate to an acceptable level,
resulting in Fed Chairman, Bernanke, showing
his determination to reduce the unemployment
rate, by announcing a third round of
quantitative easing.
Issue 5 | October 2012
The Eurozone is struggling with recession and
the economy contracted by 0.2% in the second
quarter. Germany, the region's biggest economy,
grew by 0.3% in the second quarter, causing
concerns, as this may not be enough to propel
the Eurozone out of recession. European
Central Bank president, Mario Draghi, made a
commitment to purchase an unlimited amount
of short-term bonds from euro countries
seeking assistance. Combined with the
permanent bailout fund that was given the go
ahead by the German Constitutional Court,
this is a strong effort to save the Eurozone
from the effects of its debt crisis.
the impact that this will have on South Africa.
In July, it was revealed that China grew at its
slowest pace in three years; the country's GDP
grew by 7.6% in the second quarter. A month
later, China announced a one trillion Yuan
infrastructure project designed to stimulate
the country's economy. Japan joined major
world economies - the US and Europe - by
launching its own monetary stimulus programme.
Africa's GDP forecast.
The efforts of several central bank leaders have
not gone unnoticed by the markets. The
monetary stimulus programmes have caused
markets to rally with equities up 7% over the
quarter and 22% over the past year (MSCI
World Index). Other global asset classes have
also performed strongly, with global property
delivering a return of 30% over the past year.
negative after several weeks of labour unrest.
In response, the Monetary Policy Committee
decided to cut the repurchase rate by 50 basis
points to 5%.
The global growth slowdown is starting to have
a notable impact on South Africa's current
account; in the second quarter, a deficit of
6.4% was recorded - the widest in almost four
years, and a consequence of declining export
demand from our trading partners. Added to
this was the labour unrest we saw in the
country's mining sector. This caused the
International Monetary Fund to lower South
In the last week of September, South Africa's
credit rating was downgraded by Moody's from
A3 to Baa1. The ratings agency cited policy
uncertainty ahead of the ANC's elective
conference that will be taking place towards
the end of the year. In addition, they believe
the investment climate has become more
Despite these concerns, South African markets
have benefitted from the 'risk on' trade with
domestic equities up 7% over the past quarter.
Domestic listed property has maintained its
position as the star performing asset class; the
SA Listed Property Index was up 11% over the
Domestic
quarter and close to 40% over the past year.
The lacklustre growth of the global and local
economy has been noted by the South African
Reserve Bank and they are concerned about
The tables below provide a review of key local
and international investment indicators for the
past quarter, as well as over longer periods.
www.stonewealthmanagement.co.za | 3
Issue 5 | October 2012
Economic and Market Overview: Quarter 3, 2012
market overview
The tables below provide a review of key local and international investment
indicators for the past quarter, as well as over longer periods.
South African asset classes (in rands)
(Performance over periods to 30 September 2012)
Asset class Indicator
Equities
3 months
1 year
3 years
5 years
LT-average*
7.3%
24.4%
16.0%
6.6%
12.5%
All Share Index
Property
Listed Property Index
Bonds
All Bond Index
11.0%
37.2%
24.8%
15.2%
11.4%
4.9%
17.0%
12.6%
10.6%
6.9%
Cash
STeFI Call
1.3%
5.2%
5.7%
7.5%
6.0%
Inflation
CPI (one month in arrear)
0.8%
5.0%
4.6%
6.4%
4.9%
3 months
1 year
3 years
5 years
LT-average*
6.8%
22.3%
8.1%
-1.6%
10.0%
Property S&P Developed Property Index
5.7%
29.7%
13.2%
-2.0%
8.2%
Bonds
3.5%
7.1%
6.2%
6.4%
4.7%
Source: I-Net and Nedgroup Investments
Global asset classes (in dollars)
(Performance over periods to 30 September 2012)
Asset class Indicator
Equities
MSCI World Index
JPM Global Bond Index
Cash
US 3-month deposits
0.1%
0.3%
0.3%
1.1%
4.0%
Inflation
US CPI (one month in arrear)
0.2%
1.7%
2.2%
2.1%
3.1%
3 months
1 year
3 years
5 years
LT-average*
8.25
-0.9%
-2.6%
-2.9%
-3.7%
-5.5%
Rand / Sterling
13.32
-3.9%
-6.4%
-3.2%
1.1%
-3.9%
Rand / Euro
10.62
-2.3%
1.6%
1.4%
-1.6%
-5.7%
Source: I-Net and Nedgroup Investments
Currencies
(Performance over periods to 30 September 2012)
Currency Value at 30/09/2012
Rand / Dollar
Source: I-Net, Morningstar and Nedgroup Investments
* Updated annually from 1900, or longest available period
Returns for periods longer than 12 months are annualised.
4 | a professional approach to preparing your future
Comment by
JP Landman, October 2012
500k,
The 6 M's and
Our National Mood
The currency is pummelled, the national mood is sombre and uncertainty hangs over all. This is
the result of several forces all playing out at the same time. Let's call them “The 6 M's”.
1. Mining (and other) strikes
At the end of July 2012, about one million man
days were lost in strike action. By 30 September,
that number had grown to 1.6 million man days.
That is half the 3.3 million man days lost on
average every year for the past 18 years.
October will no doubt add more lost man days,
as several strikes were still on-going, but that
3.3 million is a useful point of reference. In
September 2011, the lost man days stood at
5.4 million*.
touch with workers, it was cast aside by its
very own members when they asked Bishop
Joe Seoka from the SA Council of Churches to
negotiate on their behalf with Lonmin
management. AMCU officials were missing
when they had to go up the hill to tell Lonmin
2. Marikana
The Judicial Commission of Inquiry started its
work, with four months to complete it, so its
report will probably be submitted by February
2013. It will then be talked to death during the
first half of next year! In the meantime, the
Marikana fall-out has already ignited a process
of “creative destruction”. NUM has been
exposed as the union that lost touch with its
members. Whilst Cosatu campaigned about etolls and the Mangaung succession, mine
workers deserted it. The new union AMCU has
also been exposed. Once favourably looked
upon by some as a real workplace union in
www.stonewealthmanagement.co.za | 5
Issue 5 | October 2012
3. Mangaung
workers that they were on an illegal strike and
could be dismissed. It was left to CCMA officials
to do that. Some idealists saw in AMCU the
new vanguard of the left. It is unclear to me how
you are the vanguard if you are missing in action.
The platinum mines have been forced into a
process of more bargaining with unions on a
wider range of topics than they ever imagined.
Rather than less collective bargaining, there is
now much more. New world for them. The
wildcat strikes expose the fallacy that unions
can be “smashed” and there will be peace. Or
that wages can be suppressed by supply and
demand like the prices of other commodities.
Wheat, milk or gold cannot cause trouble,
people can. The practice of dealing only with
a majority union (winner-takes-all) will have to
be re-visited. It will be hell for management
who will have to bargain with two or three
different unions in the same room, each trying
to outbid the other. But that is the new world
taking shape. The notion that management can
outsource their social responsibilities, for
example by paying a cash housing allowance
to workers rather than working to build decent
houses, has been thoroughly discredited. There
will be more social involvement, not less. Local
governments who do not provide bulk services
where houses can be built and do not facilitate
development also stand exposed.
6 | a professional approach to preparing your future
I stick to the view that I have held for some
months now - wait for the branch nominations
to be in. Then, and only then, will we see which
way the wind blows. In the meantime, rumours
of “a deal” between Zuma and Motlanthe are
circulating in the political market place. Branch
nominations will also influence such a deal.
4. Malema
The SA media's favourite personality, Julius
Malema, grabbed the headlines with his postMarikana speeches. Since then, he had to appear
in court on criminal charges and the taxman
got a court order to recover some R15 million
from him. Several of his cronies also appeared
in court on various charges related to
“tenderpreneurism” (The contrast with Greece,
where nobody has been in court yet for all the
tax shenanigans preceding their financial
collapse, is striking).
The one constant about Malema is that the
media and chattering classes keep talking his
support up. Facts suggest differently:
•
Absolutely nothing came of all the
predictions that there will be an uprising
and violence should Malema be charged.
The same predictions were made when he
was first charged in the ANC's internal
disciplinary process.
•
Of the 15 000 people expected at the night
vigil before his court appearance only
2 000 turned up. This is his hometown.
•
At Marikana, the strikers listened to him,
•
then sang songs about Bantu Holomisa and
asked Bishop Seoka to negotiate on their
behalf.
in via the bond market. The real risk for SA is
that these inflows dry up. Then both the
currency and interest rates will deteriorate.
The Reputation Institute's surveys found
consistently low ratings across all groups
and segments of the economically active
population for Malema's leadership.
6. Money
•
TNS found 20% support for the statement
“I support what Julius Malema says and
does”. That is less than the DA's support
base.
•
The Friends of the Youth League has
established a fund to settle Malema's tax
bill. It will be interesting to see how much
money comes in. I wish he would go off
and form his own political party. With 10%
to 20% of the vote, that will really get SA's
democracy going!
5. Moody's
The Moody's downgrade brings its rating of SA
in line with that of the other two agencies,
Fitch and S&P (Moody's used to have SA a notch
higher). SA bonds are still rated above the
lowest investment grade, and so qualify for
the investment portfolios of most of the world's
pension funds. With enormous amounts of
money being printed by the Fed and the ECB
and that money looking for a yield, plus the
fact that the whole world is looking bad, it
could mean that capital inflows into the SA
bond market will continue. From Marikana to
the end of September, R4 billion has left SA
from the equity market and R9.7 billion came
The last of the 6 M's is the money going into
President Zuma's Nkandla home. It is clearly
out of all proportion, even if legal. The Public
Protector is investigating. More embarrassment
awaits. Not the leadership the country now
needs. However, it was consistent revelations
by the media over many months that flushed
the Nkandla story out.
Add that to the Constitutional Court's
unanimous decision that Mr Simelane's
appointment as head of the NPA was invalid
and one has a strong testimony to SA's open
society institutions (media, Public Protector,
Constitutional Court). The pundits who thought
Chief Justice Mogoeng Mogoeng would just
do Mr Zuma's bidding must feel a bit sheepish.
So what?
We see the impact of the 6M's in the weaker
Rand and, to some extent, in the bond market.
It is a risky time for SA, but the country
experienced much worse in 1996 and 2001.
The 6M's, combined with global forces, may
still drive us to a repetition of those times, but
we are certainly not there yet. The Arab proverb
used by General Smuts comes to mind: “The
dogs bark, the caravan moves on”.
*Andrew Levy & Associates
www.jplandman.co.za
Published courtesy of BoE Private Clients
www.stonewealthmanagement.co.za | 7
"It's not how much money you make, but how much
money you keep, how hard it works for you, and how
many generations you keep it for." ~ Robert Kiyosaki
talk to us
The Stone Wealth
Management team
welcomes your feedback.
If you have any queries,
suggestions, praise or
complaints, please email
admin@swm.co.za and we’ll
either get back to you
personally, or we’ll tackle
your topic in a future issue
of The Lighthouse.
Stone Wealth Management
a professional approach to
preparing your future
Ficus Building Sanyati Park
3 Abrey Road Kloof
PO Box 29275 Maytime Centre
Kloof 3624
Tel 031 764 5899
Fax 031 764 5647
christelle@stonewm.co.za
VAT reg no 4930234093
CK No 2006/038071/23
Stone Wealth Management is a licensed
Financial Services Provider FSP 29494
you asked us...
What do I do if the
stock market crashes?
Don't panic!
Shares are prone to short-term fluctuations, but tend to go up over
the longer term. Investors are advised to take a long-term view of
their portfolios, ie, don't try to time the market, but rather stay
invested.
did you know?
The art of risk management involves managing those risks that you
are capable of managing and insuring against those that you cannot.
www.stonewealthmanagement.co.za | 8