It’s time to be a Fox

Howzit China! will certainly be on our lips after the global markets slumped this week in response to the yuan decline and other economic news. Our real good news is that some experts are questioning our SARB decision to raise interest rates in the face of a deteriorating market for consumers.

So it is time to pick ourselves up, improve our game and focus our efforts. It’s time to be a Fox.

I first heard the concept from Clem Suntner when I read his book Hedgehogs and Foxes. The article below is copied from Business Day and was written by Michel Pireu on 18 August 2015. All credit to him therefor for the first part of this blog.

In 1953 the philosopher Isaiah Berlin divided thinkers into two categories – the hedgehog and the fox – borrowing from Greek philosopher Archilochus who said, “The fox knows many things, but the hedgehog knows one big thing.” Hedgehogs, argued Berlin, see the world through the prism of a single overriding idea, whereas foxes dart hither and thither, gathering inspiration from the widest variety of experiences and sources.

Recently, University of Pennsylvania psychology professor, Philip Tetlock conducted a multi-year study of the outcomes of expert political forecasts about international affairs. He studied the aggregate accuracy of 284 experts making 28000 forecasts looking for patterns in their success rates. Most findings were negative – conservatives did no better or worse than liberals; optimists no better or worse than pessimists. All were only slightly more accurate than chance, and worse than basic computer algorithms. Only one pattern emerged: how you think matters more than what you think.

“ The most important factor was not how much education or experience the experts had but how they thought, “ says Tetlock. “The better forecasters were like Berlin’s foxes: self-critical, eclectic thinkers who were willing to update their beliefs when faced with contrary evidence, were doubtful of grand schemes, and were rather modest about their predictive ability. The less successful forecasters were like hedgehogs: they tended to have one big, beautiful idea that they loved to stretch, sometimes to breaking point.”

Beginning with the idea that foxes are better at predictions than hedgehogs. Tetlock looked at the underlying differences in cognitive approach and found clear differences. Foxes are cautious about making predictions. Hedgehogs are not, but are more likely to suffer from overconfidence and hindsight bias. Foxes are avid gatherers of ideas from many sources. Hedgehogs specialise and resent ideas that contradict their thinking.

If something isn’t working foxes will look for a new idea or model. Hedgehogs seldom vary their approach and are more likely to use new data to tweak existing theories. Foxes readily accept they’re wrong. Foxes accept complexity. Hedgehogs believe in an underlying simplicity in everything. Foxes are more concerned with the evidence than the theory; hedgehogs see data as “noise” that obscures underlying truth. Consequently, foxes are better equipped to survive in rapidly changing environments in which those who abandon bad ideas quickly hold the advantage. Hedgehogs are better off in static environments that reward persisting with tried formulas.

Little did I realise on the 18th that the global economy would take such a fast turn. In our next blog, we will look at the whether a fox or a hedgehog is needed for the next period of what has been a fairly good run in the property market. Look forward to “meeting you again, at the Junction”, that’s the Homeloan Junction, of course.

Yours in Property.

Affordable housing market [ Important Message]

This blog has taken little effort but the message is so important for those of us in the home loan industry that, if you have not read it, you need to.

Three reasons why:

  1. If the country is housing its people, that’s good. People don’t break what they own, generally. If the property gains in value, they have an asset to increase their wealth. Whilst doing this, their creditworthiness increases which could assist them to access borrowing for brown and white goods. In short, the economy grows and further jobs result.
  2. More homes for different target markets will be built and our shack dwellings will decrease. How cool would that be! Dignity for our people and, on a smaller scale with millions more people, the same virtuous cycle above.
  3. Knowing this, you can direct your sales attention to the mass market. Hard work we know but those that I know are doing it, find it lucrative. Opportunity in the wings!

Here is the article from Moneyweb, 12 August 2015:


Affordable housing market sparkles


CAHF report: since 2011, bonded sales in the R300 000 to R600 000 category rose faster than others.

Ray Mahlaka  | 12 August 2015 |

Read Full Article


Yours in Property

Take control of your monthly expenses today! [Free HLJ Budget Tool]

Funny how things happen at the same time!

In this post we will give you our Homeloan Junction Budget Tool and refer to a Moneyweb Today article. The Moneyweb post arrived just as I put the finishing touches to the HLJ Budget Tool. Serendipitous, I would say!

So why the Tool?

Most of us don’t have a budget. We live from hand-to-mouth, month-to-month and while away our time and our money on necessities and fancies. The danger is that as this forms a habit pattern, we wonder where the money’s gone and why there’s so much month. Month after month, year after year, we live as if there is no tomorrow financially. Often, if we’re really honest with ourselves, we take on bad habits in the process – we eat, drink and smoke too much. After all, life is stressful, you know. Then, we may rack up some unexpected medical bills in the process as we get older. All part of life, you know.

6% of South Africans can retire comfortably. In case you wonder about the other 94%, they don’t retire comfortably by level of degree.

What we mean by that is that the next 6 % below the “comfortable 6%”, live a little less than “comfortable”. Starting to experience the world of retirement myself a little, I have family in their 80’s. Retired since age 58, 25 years later they’re finding prices very high. Thank Goodness, they have not squandered their money but things are tight – much tighter than when they retired.

What we learn from this is that retiring with income that rises, or is supplemented with assets that may be sold, is wise financial planning. So, the next 6% behind the second 6%, is probably already not ready to retire at all in South Africa; of a truth, the situation quickly becomes dire and a Government pension of about R1600 per month, rising at 6-7% per annum, does not satisfy even basic needs.

Everything in our beautiful, tortured country points to sadness as we ponder these thoughts. My wife read me an article the other day that said one of the greatest gifts you can give your children is to not be a burden to them in your retirement. Oh may that be a simple goal for you when you finish reading this blog!

Get the full Moneyweb article here – MONEYWEB-TODAY-ARTICLE.pdf

Using elementary Excel, I have created a Tool for you to budget. Customise it for your own circumstances and please note that the numbers are just examples, so put your own in.The Tool allows for your Gross Income. It then deducts your direct expenses like UIF, Income Tax etc to arrive at your Net Income Before Expenses.

Then it deducts two kinds of Expenses: Need To Have’s and Want To Have’s. Call them what you want and re-arrange the items as you wish [after all, we need a little retail therapy or entertainment some time J] but just be true to yourself. Question what you earn and what you spend honestly. Commission earners especially project their earnings – like true sales people, they often believe they are going to earn more and spend less than they really do over the long-run. Don’t fool yourself. And, if you really want to test your reality, then commit to an extra amount repaid monthly on your bond and see how good you are at sticking at it.

You can download your copy of this tool here –HLJ-Budget-Tool.xls 

The point is, every few hundred Rands you save in this exercise could literally put you into the top 6% at retirement. And, keep you there.

 Now to the final points……….

1. I am not a financial advisor, so speak to yours and begin to commit to a long-term savings plan. Retirement Annuities, Satrix, DBX’s etc are great vehicles to discipline your savings. And, by the way, remember some Life and Disability cover for those you love, if you don’t make it.

I have tried to teach all financial levels of people the simple fact of compounded interest. By the way, Albert Einstein called it his “most profound” learning. Two elements for now:

  • R100 invested for 10 years and 20 years at 8% is R18294.60 and R58902.04 respectively. The compounding is not a straight line as interest on interest continues to kick in the more you save.
  • The inverse of this, which the Insurance industry correctly calls “the cost of delay”, is that if you want R60000 , then the faster you start saving the less you have to save. R60000 costs you R101.86 over 20 years and R327.97 over 10 years, both at 8%.

2. I am a banker, so back to the tired old truth that your bond is a good place to save. Whatever interest you save is at your bond rate after tax.

For example, at a bond rate of 10%:

Bond: R80000
Years to go: 20
Repayment: R7720.17
Total Paid: R1852841.56
Interest spent: R1052841.56
Payment increase of 20%: R9264.21
Years to pay: 12.83 years
Total paid: R1426688.00

Original total payment less new total payment: R1852841.56-R1426688.00 = R426153.56


Homeloan Junction cares. This blog may seem trite and simplistic to some. To others, it may just be the spark of new financial life. If it touches one life today then the last two hours writing and calculating has been worth every minute.

Yours in Property