CHRISTMAS 2016

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Regina Brett, 90 years old, of Cleveland , celebrated growing older by writing down a few life lessons. In doing so she created a famous article of those things that we need to read and internalise for application in so many emotional and life circumstances. Here they are with acknowledgement of her Wisdom:

  • Life isn’t fair, but it’s still good.
  • When in doubt, just take the next small step.
  • Your job won’t take care of you when you are sick. Your friends and family will.
  • You don’t have to win every argument.
  • Stay true to yourself.
  • Cry with someone. It’s more healing than crying alone.
  • It’s OK to get angry with God. He can take it.
  • Make peace with your past so it won’t mess up the present.
  • Don’t compare your life to others.  You have no idea what their journey is all about.
  • Take a deep breath every now and then. It calms the mind.
  • Get rid of anything that isn’t useful.
  • Clutter weighs you down in many ways.
  • Whatever doesn’t kill you really does make you stronger.
  • It’s never too late to be happy. But it’s all up to you and no one else.
  • When it comes to going after what you love in life, don’t take no for an answer.
  • Burn the candles, use the nice sheets, wear the fancy clothes. Don’t save it for a special occasion. Today is special.
  • No one is in charge of your happiness but you.
  • Frame every so-called disaster with these words: ‘In five years, will this matter?’
  • Always choose life.
  • Forgive others and yourself.
  • What other people think of you is none of your business.
  • Time heals almost everything. Give time a little time.
  • However good or bad a situation is, it will change.
  • Don’t take yourself so seriously. No one else does.
  • Believe in miracles.
  • God loves you because of who God is, not because of anything you did or didn’t do.
  • Don’t audit life. Show up and make the most of it now.
  • Growing old beats the alternative of dying young.
  • Your children get only one childhood.
  • All that truly matters in the end is that you loved.
  • Get outside every day. Miracles are waiting everywhere.
  • Envy is waste of time. Accept what you already have, not what you need.
  • The best is yet to come…No matter how you feel, get up, dress up and show up.
  • Life isn’t tied with a bow, but it’s still a gift.

And then there is another reading that may enrich your life at this Christmas time.

It was written by Dr Randy Pausch in his book, The Last Lecture, one of the bestsellers in 2007. He sadly died of pancreatic cancer in 2008.

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Personality:

  • Don’t compare your life to others’. You have no idea what their journey is all about.
  • Don’t have negative thoughts of things you cannot control. Instead invest your energy in the positive present moment.
  • Don’t over-do; keep your limits.
  • Don’t waste your precious energy on gossip.
  • Dream more while you are awake. Then act.
  • Envy is a waste of time. You already have all you need.
  • Forget issues of the past. Don’t remind your partner of their mistakes of the past. That will ruin your present happiness.
  • Life is too short to waste time hating anyone. Don’t hate others.
  • Make peace with your past so it won’t spoil the present.
  • Realize that life is a school and you are here to learn. Problems are simply part of the curriculum that appear and fade away like algebra class, but the lessons you learn will last a lifetime.
  • Smile and laugh more.
  • You don’t have to win every argument. Agree to disagree, then let it go.
  • Negativity starts with you. Don’t respond to a friend’s happy greeting of: “Good morning, how was your weekend? with, “The weekend was too short and I have to come back here to work”.
  • Be happy, be grateful, but don’t be content.  There are many people who would sacrifice a lot to be in your place.
  • Be positive, even in down times. Some may think you’re insane, but they would want to be like you.

Community:

  • Call your family often.
  • Each day give something good to others.
  • Forgive everyone for everything.
  • Spend time with people over the age of 70 and under the age of 6.
  • Try to make at least three people smile each day.
  • Don’t allow  yourself to fall  into compromising situations. You may live to regret some of them.
  • What other people think of you is none of your business. You cannot control how others feel.
  • Create support when you don’t need it. Then stay in touch with those family and friends. In life, things happen.

Life:

  • Put God first in anything and everything that you think, say and do.
  • God heals everything.
  • Do the right things.
  • However good or bad a situation is, it will change. Nothing could ever remain the same.
  • No matter how you feel, get up, dress up and show up.
  • Get rid of anything that isn’t useful, beautiful or joyful.
  • When you awake alive in the morning, thank God for it.
  • If you know God you will always be happy. So, be happy.
  • Life’s routes are all about choices, think before you make that choice, and when you do, you will be happy for it.

As I write this, some of the sayings seem so cheesy and old fashioned. But, I guess the question is not so much about the gifts you give at a time like this but rather the Giver. All of us love a Rolex watch but would a hug from a long-lost friend also be good and perhaps, a reconciled family, be even better and longer lasting. You decide and do with the messages what you want.

It remains for Homeloan Junction and this blog to wish you a wonderful Christmas season. Enjoy the fellowship of family and friends and take that breath that energises you for 2017. 2016 has been a tough year for many and it is difficult to ‘spin’ it any other way. But many have survived and even thrived in it; all need to feel gratitude even if only for their own sakes. Many of us have lost loved ones or things we held dear but, if you’re reading this with any sense of depth and meaning, you have survived to tell the tale. And it probably is true that ‘whatever doesn’t kill you really does make you stronger’.

Yours in Property

THE REARVIEW MIRROR

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2016 has indeed been a volatile year but let’s have a look at some of our national and property data from the banks.

Please prepare yourself, the economists and bankers have not been bundles of joy this year. Even the way they have described the data is often quite negative. Most of what they say virtually carries over to 2017. Bear in mind that comparison is at best subjective as different banks use different bases for calculation; but, we just seek the trends for comment.

HEALTH WARNING: Reading the information below could be bad for your health 

Standard Bank [06 December 2016]:
Macroeconomics: Data Release: November House Price Increases slow to 6.3% year on year 

 

  1. House price increases [HPI] slowed to 6.3% in November from 6.9% in October 2016.
  2. 2016 can be likened to 2012 in terms of house price growth but underperformed that year by 3%. Remember then we were coming out of the very low base of 2008-2010, the Sub-Prime crisis.
  3. Growth in house prices has been moderating for the past five months because of tougher conditions in the economy and reduced confidence.  The labour market softened further in Q3 and unemployment rose to a historical high of 27.1% [published 23 November 2016]. 63% of SA households rely on salary and wages whilst this group accounts for 75% of mortgages. Needless to say, mortgages need a healthy labour market.
  4. SARB data showed that household credit growth slowed to 1.0% yoy in October, from 1.2% yoy in September. Within household credit, mortgage advances (60% of total) slowed for the fourth consecutive month to 3.4% yoy from 3.7% yoy.
  5. Affordability is expected to continue impacting adversely on the demand for and supply of mortgages, and ultimately on property prices.
  6. Purchasing activity will continue to point to subdued demand due to rising political uncertainty, slowing growth of disposable income, a tightening labour market, and tight financial conditions. Commensurately, we expect to remain below inflation for the remainder of 2016 and into 2017.

FNB Residential Mortgage Barometer [6 November 2016]:

 

  1. There has been no real growth to speak of in the residential market.
  2. FNB is not projecting any major change in 2017 despite an increase from 0.2% [2016 projection] to 1% [2017 projection] GDP growth and interest rates that remain steady.
  3. HPI are projected at 5.1% this year with 2017 forecasted at 3%.
  4. Total mortgage lending reduced 6.3% in 2016 and FNB projects a further 2% decline in 2017.
  5. FNB records a declining trend in mortgage arrears from 3.3% in 2016 to 3.2% in 2017.
  6. Good news for banks and their lenders, is that Residential mortgage vulnerability to rates increases and economic shocks has greatly reduced from the very serious days of 2008.
  7. Household sector mortgage loans as a percentage of disposable income is down from 49.2% in early 2008 to 34.7 % in 2nd quarter 2016.
  8. Debt to disposable income ratio has declined from 87.8% to 75.1% in the same period.
  9. Credit growth looks set to remain “pedestrian”.

 

ABSA HOMELOANS HOUSING REVIEW [Q4: 2016]:

 

  1. ABSA puts GDP growth at 0.4% projected in 2016 and rising to 1.1% in 2017.
  2. Inflation is expected to be 6.3% in 2016 and 5.5% in 2017.
  3. Interest rates are up 0.75% in Q1:2016 and have been level since then.
  4. Consumer have endured heightened stress owing to rising unemployment.
  5. HPI has been in a band between 3.5% and 4.5% in 2016 and  2017 is expected to be similar. This results in house price  deflation in real terms between 1.5% and 2.5% in 2016 and 2017.
  6. Inflation has been driven by food, fuel and the Rand.

 

I warned you! So, let’s create some context……..

It’s amazing that about a year ago the Chinese stock market collapsed so fast that the stop-losses failed. Remember those heady days when it seemed everything commercial was breaking loose around us. Now we have survived through 2016 to see the Dow Jones breaking 20000. On top of that, we have survived the Rand at UKP24 and watched the US$ rate rise to R17 and pull back to as low as R13.25. Our stock market has moved sideways between 47000 and close to 53000 whilst the DOW has broken records. Our President has faced 1, no 2, no 3 No-Confidence debates and even a request in the ANC NEC for him to stand down.

And then we have the American election; an uprising, to say the least. You now doubt saw the TIME Magazine with Donald Trump on the cover page. The title: Donald Trump – President-Elect of the Divided States of America. And, after all the orchestrated insults and the locker-room videos, the NYSE likes him. How “otherwise” is that?

Our politics and SOE’s have been a disgrace this year. No-confidence debates shouted and clapped down by a majority; their right but also their connivance. The President being told to “follow his conscience” but it’s okay if he doesn’t. Then, the voice of the people giving nobody a real majority in any major centres but in Cape Town, Nelspruit, Polokwane, Bloemfontein and Durban. The first and the last, major contributors to economic growth. But now the PE, Pretoria and Joburg coalitions have uneasy senses of peace but have to work together to create real poverty alleviation and stop corruptions in its tracks. The SOE’s need no further mention. Probably, the low-point for me is the President referring the State of Capture Report for judicial review instead of a commission of inquiry.

But you know, the property industry has survived and even thrived. Not everywhere has had the Cape Town success story but, so help me, matters could have been worse everywhere. Just some comments in this vein on the above Bank analyses:

 

  • 2016 GDP growth is projected between 0.2% and 0.4%. I’d take the latter any day. And both have avoided recession!
  • Affordability is in order and, when stress tested, is the best since 2008. In fact, FNB says the consumer is in a much better place to withstand shocks.
  • Debt on the mortgage books is due to continue a slow but certain improvement. That’s very good news because a bleeding banker get really grumpy when deciding on credit. Good repayments make him [her?] much happier.
  • The rate of cost increases of new sales is reducing for the mortgage available. I have spoken much of the impact of slowing price rises on affordability and the lender’s attitude to loan-to-value. Good news!
  • GDP growth predictions are bullish. Mr Gordhan says as much as 1.7% and even the banks are saying 1 and 1.1%. I’ll take 1% anytime and 1.7% every time. Can you imagine growing 5X faster than the 0.2% prediction this year? FNB may be right that credit growth may remain “pedestrian” but let me tell you, the positive spin on a growing economy will put everybody in a better mood. Get the Springboks to win against Georgia and we could have a recipe for a mini-boom [Sorry, just a joke!]. But seriously, even if HPI continues to decline in real terms, the news of some green shoots in economic growth and another 200mm of rain, could offset the political shenanigans that, in any case, go with an Elective Conference at end-2017.
  • No more needs to be said for Employment. Give a businessman confidence and you have a willing horse to pull the employment cart.
  • The debt-to-income ratios have declined very positively over the last few years. Good news!
  • Last among many points, a consumer who is more confident, in a growing economy, with interest rates somewhat steady [I’m not truly convinced that we have seen the last of rate rises given the FED’s 3-increase stance in 2017], and house price increases declining in real terms whilst inflation drops within the 6% target band of the SARB, could be the very economy for which we seek in 2017. Would we want more? Do we need more, much more? Of course!. But just some encouragement in the number and the messages would be truly valued.

I would love to hear your views, but as a good quote goes:

“You’ve done it before and you can do it now. See the positive possibilities. Redirect the substantial energy of your frustration and turn it into positive, effective, unstoppable determination. “ Ralph Marston

Yours in Property.

AMERIEXIT

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I know it sounds like a blog that should be written after Christmas and about the past 2016 year. But it isn’t, of course, because it isn’t Christmas yet, though I know you could have been fooled by that as Checkers lead the Charge of the Christmas Light brigade on 25 October 2016 – a full two months before that beautiful Holiday.

Just some context for my thoughts. I have written about Brexit in early July 2016. Lest we forget, Britains decided to exit the EU, signing their declaration of independence from Europe by invoking Article 50. To date, Theresa May has appointed a new Foreign Minister and her Chief Brexit Negotiator and then seems to have gone coy on everybody. I guess undoing a massive agreement with your country’s bedfellow does take time. In the meantime, the UK Pound has collapsed from US$1.70 to US$1.20 [Approx 30%] but, according to the Office for National Statistics, the UK’s gross domestic product expanded 2.3 percent year-on-year in the third quarter of 2016, accelerating from a 2.1 percent growth in the previous period and in line with preliminary estimates. It was the strongest reading since the second quarter of 2015, boosted by net external demand and gross fixed capital formation. Not bad it would seem, given some of the gloom and doom around Brexit.

Then came Munexit in which I essentially looked at local government and pondered the state of the vote in SA’s large metropoles. My basic encouragement was that voters turn out because what happens in our cities matters deeply. They did, and the rest is history but for Bloem, Polokwane and Ekurhuleni where the ANC held sway. To be honest, apart from some positive political statements, I haven’t felt the change yet –  it takes time to turn a city. Frankly, what I feel is irrelevant but what the less advantaged feel is crucial especially if the ANC gets it act together from 2019 onwards.

What really happened in Britain and our City Councils? Corruption got “klapped” and the twin peaks of Immigration and Independence [read: a new spirit of nationalism] got challenged. It’s a stretch to link the two with respect to our metropoles, but there is some familiarity.

Enter Ameriexit. Who would have guessed!? Donald Trump, the man with the everlasting kuif, beat Hilary. Apart from some re-counts in the huge votes of Wisconsin, Pennsylvania and Michigan which we shall see, he beat her hands down. The first women, her email saga, alleged corruption, who knows? On his side, a huge white male vote, some 70%, and though I don’t have the final stats, a somewhat “secret” minorities vote. But here he is, in all his glory, the first really non-politician American President-Elect.

I watched the elections unfold. Trump seemed to hammer Hilary’s person incessantly and, honestly, to the point of boredom. But he also hammered on about Jobs and Immigration and Corruption [read: the fact that you are, or the ability to be, bought for political favours]. Beyond that, he continued to say and reveal little. Do you really know how he will run the American economy? Do you really know what he will do with NATO or NAFTA or Obama Care? I don’t. But what I do know is that he is going to “Make America Great Again” and for all of Hilary’s, “We Are Great Already”, he was heard where and in the quantity it mattered, for votes.

The parallels to Brexit are sobering. Both countries are in the throes of radical globalisation and both, utterly dependent on trade with the rest of the world. Globalisation has increasingly raised the prospect of un- or lower quality, employment. It kind of sneaked up on us and we were duped by the first world Unemployment stats coming out of America. 5% and on its way to 4% is enviable especially at our 27+%. Yet, beneath the statistics is deep unhappiness as jobs have left the USA shores equipped with a license and a patent so that some stranger in Asia could manufacture the tekkies and TV’s. Slowly but surely, the industry of America wilted and the city centres decayed.

On the other hand, immigration proceeded unabated and lower-level jobs were absorbed by Mexicans et al. If you hail a taxi in New York, you very seldom hear American spoken behind the steering wheel. I also met some Americans on a cruise who own serious real estate in Dallas and he admitted that he could not conceive building, maintaining and managing his property portfolio without Hispanics to do so. Similarly, Britain over the years has experienced a huge influx of people from former colonies; a trend which has only increased in the last decade. Resources are seriously strained and the NHS, roads and housing have all felt the difference.

Then along came the Syrian crisis and bombings in Paris. As I sit and think about it, these visuals seem to have become a turning point. David Cameron seems to have been naïve to think he could have held and won a referendum in favour of staying in Europe. And, after many requests to stand, Donald Trump seems to have read the air of discontentment in the American populous. Sweeping statements of disgrace and collapse were all it took to win. Walls, renegotiations and exiting non-Americans became the mantra for success. But, along with it, his anti-corruption rhetoric certainly struck a chord down here!

Quo vadis? All of the above means little unless we see how it affects us. I’m tempted to stick out my ostrich-like neck but let me remain cautious for one simple reason: I don’t know.

Uncertainty reigns in three main areas: the Stock Market; interest rates and politics. Because of the extent of uncertainty, business as usual seems to be the order of the day for now, at least. Commodities had an early run as the markets decided that Trump would spend on infrastructure. The UKP remains under pressure so the US$ has remained strong to it. Interest rates have remained stable and the possibility that Governor Yelland will raise them in December is real. There is much debate about some of Trump’s early appointments and much is being made of the revision [and exclusion] of many of his campaign promises. Overall I think he will be conservative and will actually be able to accomplish many of the things he has spoken about given the Republican majorities in the Senate and Congress. However, he won’t be able to achieve them in the way he simplistically campaigned. Politics is not business and “deals” have far more long-range complexities than building a high-rise or a golfing estate.

For us, America has “exited” globalisation and immigration. They would like economic growth, prosperity and security to follow. Time will tell if their votes counted for this “wonderful” outcome. It is going to be a roller-coaster ride for the next two years at least until Trump settles down and moderates some of his realities. On the upside, we could have a strong America resolving Syria with Russia and creating good links and alternative thinking with Britain and Europe and even China. My sense is that we don’t need to consider the downside because sanity will prevail.

One thing we have is change. I am reminded of the words of William Arthur Ward:-“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”

Decide where you are positioned. Reposition as required. Keep your face in the direction you intend to go.

Yours in Property.

ZERO [PART 3]

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In our previous blogs we have looked at the challenge of close-to-Zero economic growth and raised the following actions for consideration in your business, whether you are a one-person business or a more corporate entity:

Zero Part 1:

1. Complacency

2. Costs

3. Cash.

 

Zero Part 2:

1. Income

2. Facilities

3. Staff Morale.

These elements of business always bear relevance. Fact is, when things are going well and economic growth is flying, we all lose sight of them. That’s why I chose to discuss Complacency first – it is our fat-and-happy state where nothing can go wrong, … go wrong. Beware and avoid the hardship of missing the chance to streamline your business. Apart from Complacency, practically everything else works in combination rather than in any order. The same goes for this blog’s elements.

 

In Part 3 I would like to suggest some actions around three final issues: Hard Work, New Opportunities and Relationships.

 

1. Hard Work:

I must admit, I am old school. Many years ago in Nedfin Bank, our MD introduced the “next big thing” idea – Work Smarter Not Harder. We had post-its [they’re not that old, you know!], personal note pads, diaries and notice board posters. We all had to work smarter, not harder. It was a bit like losing weight; I tried and tried to work smarter but hard work just kept on coming back. I went home earlier to force smarter work and then came in early to catch up on yesterday. I thought smart, acted smart, threw out lots of questions and had lots of answers but, alas, smarter eluded me. Hard Work won most of the small successes and in between, a little Smart helped.

Identify with me? If not, count your lucky stars! I have seen young men in the sub-Prime days begin to hold onto their business. When it was quiet, they did other things, lived in different places, bought motorbikes to save fuel and basically hussled while they waited. No other smart idea could keep their businesses alive and survival brought out the best in them under the worst of situations. But survive they did. Hard work did that and if there was a modicum of Smart work, that just helped. I know I’m being simplistic and that many great Smart ideas have made people fabulously rich. But, my sense is why we know them so well is that there are so few of them. The rest have worked their guts out to get where they are today.  You make your call, never denigrating Smart if you can possibly think of it, but Hard will probably be the way through to better economic times.

 

By the way, two of the smartest things you will ever do is Delegate – well-explained tasks to people you know can do them [or be supervised to learn to do them] –  and, Develop a Succession Plan. The former we will take as understood, but the latter is like getting excited about doing your Last Will and Testament. But, who will run your business if you’re incapacitated? Do you have Income Protection insurance for long-term illnesses? What would happen if you never come back to work – who would keep the business going? What does your Will say about your shares and to whom do they devolve? Knowing that “it happens to the other guys”, many of us sadly leave these questions unanswered and cause much family strife and employee harm when something “happens to us”. Think about it and DO something about it.

 

2. Opportunities:

Mom always said, “Opportunity only knocks once.” I loved her dearly but, coming through the Second World War it must have felt like that for her generation. But we know that it is simply not true. Indeed, we live in an age of multiple opportunities – which to choose and expend our energy on, is our dilemma. We have opportunities coming out of our ears and need to remember a few [I’m sure you can think of more] basic guidelines to avoid mistakes:

  • Focus is the opposite of Diversion. A simple Resource Set will categorise an opportunity as one you can take and one you should leave. If you don’t have the resources, “stretch” may just prove too thin.
  • Good strategies comprise of what you decline and what you accept. Saying “No”, is also good strategy. Saying “Yes” to everything is bad strategy.
  • Stay within your core skills or be very careful. Origination was my core when I ventured there. RMD Meats was non-core and therefore a high risk for me. You can only justify the latter if you have demonstrated that you know how to run a business in spite of the product. Know when you are out of core and learn quickly about the product, and its industry.
  • Know adjacent businesses and pursue them if you seek more opportunity. Bond origination and Insurance are adjacent. In theory, so is Estate Agency but estate agents will tell you very different so listen to their advice.
  • Take your team with you. The old analogy of riding into the sunset whilst the posse breathes in your dust, is true. Don’t go it alone; you might end up there.

 

3. Relationships:

I wrote a blog called Relational Affinity so I don’t really want to repeat myself. However, most business depends on relationships. They mean the difference between transactional business – doing many deals with different people –  and, relational business – doing many deals with the same people [in a spirit of mutual respect and trust].

When Zero is your reality, the good news about relationships is that they become a higher barrier to entry. Think of it this way: It is really hard to break into origination when you have to develop new relationships rather than enjoying doing the business with long-standing relationships. On the other hand, holding onto long-standing relationships is even more important when Zero is your reality than in the “good times” when “everyone” is buying and selling.

Cherish your relationships is all I’m saying. Keep them strong, loyal and resilient as they are a very source of your success.

That’s All Folks! is the famous ending of Walt Disney cartoons. Some of you will say: Thank Goodness!

But “positive” is not just the opposite of “negative”.  It is also the advice that comes from experience; the advice we sometimes know but just need reminding of. Nothing is new in the last three blogs but, I can tell you, failure to heed some of these elements of business, have taught many businesses very harsh lessons. On the other hand, heeding some or all of them, has kept many a business alive and enabled it to prosper and even take emerging Opportunities, when times were less than favourable.

Homeloan Junction cannot promise you good news all the time. Personally, I find these blogs daunting when politicians and the like are stealing or talking rubbish to adherents, and we’re on the cusp [25th] of a Rating review. It is tough to be positive and I won’t be simply do it to sound like I am. But, sound advice, in the face of very low economic growth, is also positive and even, caring. We care about the businesses that associate with us and we care about the decade-and-longer relationships that we have nurtured over the years. Our success is linked to your success and that commercial umbilical cord means far more to us than you imagine. In that spirit of inter-dependency we write; hoping that something of value is imparted to you in your personal and business capacities.

Yours in Property.

ZERO [Part 2]

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From Zero to Hero.

You have heard the term; a kind of Rags to Riches phrase.

It has extreme application to this blog. You see Hero as You if you function as a sole trader or commissioned estate agent or bond consultant and certainly, it has application to every business.

The Business [read, if applicable: You] is the Hero. Nothing you do, nothing you say, nothing you commit, no contract or future promise or anything that you spend or save, should be done for you as opposed to your business. Your business is your steed in war, your comfort in distress, your source of funds and funding, your means to grasp opportunity, your tax-breaker and your tax-maker, your alter-ego , your income and cashflow, your means to success, your source of wealth and that of others – your business is the Hero under every circumstance. Keep it alive and you and every dependent upon it, is kept alive. Allow it to fail and you and every person dependent upon it fails. If you are a breadwinner in your family or a significant portion of your household income, You, in your individual capacity, are the Hero. You or your business become the reason for your commercial existence.

Too extreme a view? Consider this. It’s May 2008 and you are about to retrench the first employee. It’s painful, not according to plan, and she is your friend. But all you can say is, even though you have had a very good profit for the month, you know that sub-Prime will shut those profits down within 8 months as the banks pull in their credit granting and go into an underground shelter that only an annuity mortgage business can provide. You have to begin retrenching while you still have the resources to give your people an adequate retrenchment package that profits and cashflow allow. It is horrible to face them but if you keep the company, the Hero, alive you know you have a chance. Cull it and it culls you. We succeeded and the company survives to this day. If the view had been different, a kind of Winner Takes All mentality, the company would have folded and the people would have been seriously hurt. This way, we all felt the pain but everybody was cared for to the best of the company’s ability and we all retained our dignity. A tough, true story.

After a Zero to Hero story, the above shows you that you need not be Hero to Zero on the other side and even in the most extreme of global economic circumstances since the Great Depression in 1929.

On the 31st of October 2016, we received the news of Pravin’s [and his SARS colleagues] release from fraud charges. These little good-news windows, provided by the one-and-only Shaun Abrahams, are an opportunity to take a breather and blow a fresh breath of life into your Hero, your business. Don’t be surprised if the long-winded retraction of the charges, spurred by the Helen Suzman Foundation and Freedom Under Law submissions, is not already being taken into account by Moody’s [open to correction] in their 25 November pronouncement regarding the possible downgrade of their rating. A fight well fought and won – Justice prevailed!

So with that firmly stated, three more things to watch for as Zero remains our stagnant growth path.

1.Income

Income is obvious to every business but what I want to highlight here are some tips for its measurement. Strangely enough, more is not necessary better. Watch for:

  • What proportion of your income comes from one or more sources? You see, a mix of income sources is better than “client reliance.” One or few big clients have the ability to call the shots, and the ability to cripple your income if they leave for whatever reason. The Pareto Principle, 80% of income comes from 20% of clients is as significant in 2016 as it was when Pareto posited the theory. Don’t be caught and lulled into thinking that the “one big client” won’t have you for breakfast one day. A golden rule is to have the courage to deduct a big client’s income and work the business on the balance.
  • Your geographical spread is important. The Western Cape is growing, the Northern Province declining and Free State Province and KZN may be in decline. Is your business showing this or not? If not, expand where growth is occurring and be wary where growth may be in decline. You are not special, business follows trends and if not, the note above this one may apply.
  • What proportion of your Income is new business versus existing business? Are you dependent on old business? Could it dry up? Have you become complacent that you can hold onto all those existing relationships? Or should you be hunting for a greater proportion of new business? Do your sums and check your stance to them; you may avoid a huge surprise in the near future.
  • What proportion are paying customers and what is not? Turnover is a fool’s paradise if cashflow does not result. Debtors are real assets until they are not; then they drain every ounce of resource out of you – your time, your emotions, your facilities [more about this below], and your cash. Your Debtors Ageing Analysis says it all. It is the tool of your past and the measure of your future. When it ages, you age. You have to keep income coming from debtors who are experiencing Zero just like you; tirelessly hunt payment or it will hurt you. Debtors and Rentors are very similar. Either one may not pay you and you need to nip the issue in the bud and get paid or get out.
  • Finally, the health of your income lies in the margin. For the traders, your Trading Account says it all. Turnover less Cost of Sales plus Opening Stock less Closing Stock reveals your margin [Gross Operating Margin]. You may keep turnover by reducing margin but the more you allow it, the less your Hero can afford one mistake. Hear me please. The big client with the reduced margin that squeezes you for extended terms – yes, that client – could be the rod that strikes your back. One bounced cheque could be all it takes to reduce your Hero to Zero. And that old fact, played out in so many businesses over the decades, unwinds all the goodwill with bankers and funders built over years. Identify them, and deal with them – at least, having read this, understand the risk you face.

2. Facilities

As an old banker, there is a saying that bankers lend you an umbrella in the sunshine and take it away in the rain. True, and the reason is that bankers have a fiduciary duty to the investors and not to their lenders. In the massive size and excellent capitalisation of our banks, we forget this truism. But I can tell you, it is built into their DNA from the day they join the bank, and will come at you in times when you need facilities most. Hero needs to arrange facilities when Hero’s financial figures are good. Yes, the bank can call the facilities in but it is useless you going to the bank when you need the money; it’s just too late. Facilities, well positioned and used from time to time and managed immaculately, are not optional when you need it as Zero growth slowly takes hold of your business. Extend your bond in the good times as a precaution; afford your business facilities when the Income is great. Many of us, who have had to survive the bad times and this consistent “Zero” growth, know that those facilities are life savers if and when you need them. Of course, I’m not suggesting a lack of discipline. Don’t have the facilities, use them to continue to fund your lifestyle and then cry that they are used up when you really need them – Please No!

3. Staff Morale

One thing you know as the steward of Hero is that People Matter. Be careful that you don’t adopt a haughty “if you don’t like it, leave it” attitude with your people. Some of those people are the reason why you are where you are. And so help them, they could become the reason why you end where you don’t want to be. I know a business that is highly dependent on a Rep, another which is highly dependent on an Owner, another that requires a Specialist Team to thrive [I remember the day when the Syfrets traders broke away and formed Coronation Asset managers – and the rest is history], another that has lost key resources and another that needs to address Ageing Ownership in order to survive. All Heroes in their own right, but all dependent on the people who run them.

Don’t think that your people don’t read the papers and get worried about their futures. Ook maar net mens, I could say. But, it is your responsibility to lead them for the benefit of Hero. They deserve to know where Hero is at – going bad, they tighten belts, going good, they benefit. But if you look like you’re against the ropes every day and they don’t hear you trading in Hope, they also become miserable. Bear in mind this truth I have learnt many times: People don’t leave you when they leave, they leave you long before they go. Up to that time, they are expense but when they leave, as much as they may leave a huge hole, they at least don’t cost money. It sounds callous but those of you who have worked in tanker-type Corporates know how much damage an unhappy person can do for so long before they finally leave. How much more pronounced is the effect when in a small company, someone is miserable, unhappy, unproductive, toxic and just plain obstructionist. When Hero is the reason for being there, at least you have a mirror to hold the person to until they get happy or leave. How many times I haven’t said to someone, You can leave but leave a good report behind you. In Zero, people get unhappy; they feel Hero’s strain and pain [in your face!] but it is your responsibility, your sovereign duty, to ensure that the morale of your people is as high as you can make it. As a leader, you trade in Hope and Zero needs you to fulfil that responsibility.

I have written my heart out. Years of boom and bust and Sub-Prime have taught me the little that I share. The quality of your income, long-arranged facilities and motivated people can bring you through, You and Hero, your business.

Just a word on Homeloan Junction. This Hero may not be  the biggest but it is a conqueror. October 2003 feels like history but it was founded then in a single garage in Brackendowns. Courage, intelligence, facilities, discipline, trusting relationships, and hard work carried it through. Entrepreneurship of the highest order with inexhaustibility [if that’s a word] kept it alive and made it the success it is today. People always mattered and have been the foundation of all it has achieved. Bottomline, with guts like that, you are well placed as an associate and a client.

Part 3 awaits. Hope you’re gaining some nuggets to think about.

Yours in Property

ZERO [Part 1]

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If it were debt, this would be a seriously catchy title for my blog.

Sorry for you, but it isn’t debt unless you are one of those very fortunate few who have been wise and able to reduce your lifestyle to zero debt; more of that later.

It is the prospect for future growth in a given scenario in South Africa. And the really good news is that it seems we will avert it if can all work together. This blog will toggle a little, but I really want you to know two things up front:

  1. I believe we will not see Zero growth in our country.
  2. In case you have a jaundiced view of SA growth, bear a thought for Britain as it falls asleep economically at 0.5% growth post Brexit. SA is not the only egg in a tough economic tray. Brazil is -1.22% over the last 5 quarters, Russia was -3.7% in 2016 (estimate) and -1.2% in 2016 (forecast). India and China, both slower at present, carry BRICSA at 7.5% and 6.7% respectively.

The Medium Term Budget Policy Framework was another brilliant outline by Pravin Gordhan. At the heart of it was mutual co-operation. My belief is that SA Inc does understand that pulling together at this time could bring us through without a downgrade. In addition, despite the national debt at an all-time high, [frightening at R2tn and interest per year of R149bn!], he projects a reduction of Debt:GDP over the next 2 years. Unfortunately, in the absence of growth, that reduction will come through cutting government expenditure and higher taxes. I have made the comment many times before that our economy is well-managed under Treasury and SARB but we need, with SARS, to dig ourselves out of a (w)hole (lot) of debt.

So why Zero if all this positive belief abounds? Well, Pravin reduced our growth forecast yesterday from 0.9% to 0.5% before telling us this would change upwards next year. You can argue with me, but with the IMF also downgrading the growth forecast to 0.3% and the Sword of downgrade Damocles hanging over us, whatever the growth will be before the upturn of it, Zero sound like a number to capture my attention. Bear in mind that when you have a dramatic, quick drop in growth, you cope abruptly. It is this slow [“zero”?] growth that worries me on behalf of my readers. You can be lulled into believing that “everything seems to be okay” and then only get caught that first month salaries are late. The same applies for companies as for individual households, so whether you’re a housewife, an estate agent, a principal or a company owner, the rules apply.

If you buy what I’m saying, let’s look at how you cope with this slow growth scenario. No rocket science, just some sage input from 40 years of being in business. The real good news is that you can survive and even flourish if you just heed some simple actions.

1.Complacency

Nothing beats a careless attitude oblivious to reality. The good times end so slowly in low growth that complacency can set in easily. Remember the Rand when it bounced up to R15:US$1 and then came back “as it always does” to under R8.50? Oh really! Well it’s a little stickier this time and struggling to stay under R14. But, complacency says, we’re learning to cope. Oh really! If you’re reading this and thinking: “Hmmm….”, you’re probably not complacent. You’re probably aware that the only thing that is saving the world’s bacon right now is the Oil price and quite low inflation, both of which retain low interest rates. An attitude of: “Ag, we’ve coped with bad times before”, may belie the slow constriction of your business causing things to simply slow down.

Let me be clear, I would take what is currently happening any time, rather than some of the sudden sub-Prime medicine of recent economic history and the Boom/Bust cycles of our past economic history. The former was a gut-wrenching blow to every part of every business; but the latter was completely unstable. It was easy then to solve the problem of inflation by raising the interest rates, suppressing demand, until you could release the throttle again – binary monetary policy with a little fiscal help. These days, with the world so small and money flows almost instant, the monetary and fiscal armoury is far more complex and difficult to assess. In all of this, complacency settles in and weaves the relaxation of business to the reality that is gathering like storm clouds. Beware!

2.Costs

Costs creep up on you like complacency. Simple really – you start complaining how expensive things have got. The stationary bill rises 12% year on year, your staff need increases, transport gets expensive as fuel taxes rise, your medical aid goes up 10.2% [that’s Discovery for real in 2017 and rising!], and SA communication costs are world record-beating. But the first year you don’t feel it, the second gets tough as you discuss business over a beer and then the third……… well, that’s when you realise that it’s not about the costs, it about whether the cost is really necessary. Big difference!

Reinstate your quarterly meeting with your accountant and start to analyse those Income Statements year on year and one year before that. Have a look at the trends that highlight movement upwards. Go home and sleep on it. If no trend is too dramatic, pat yourself on the back and make sure you diarise the next meeting; your turn will come. If there is something obvious, begin the journey to recuperation sooner rather than later. One of the great ways to do this is to assess each line of cost as a percentage of Total Cost or as a percentage of Turnover. It is much easier to go up than come down. But, coming down saves businesses despite the hardship for some. Little is sacred when it comes to cost reduction. You probably never had the cost or its proportion a few years ago. Now you have allowed it to escalate out of proportion and it’s dragging you down. Ke Nako – It’s Time – to deal the issue before Zero tightens its grip.

3.Cash

Cash is king. Old but ever-true. Let me bottomline Zero when it comes to cash in your business – if your cash reserves are draining, you have a problem; plain and simple. Cash reserves accumulate when you have a healthy turnover with healthy margins, controlled expenses, managed capital investment and paying debtors. In our blog, Overtrading, we discussed growing too quickly and running out of cash to carry investment and debtors. Here in Zero, we consider turnover and margins declining while expenses and debtors increase. The answer to the latter is spelt N-O-N-E and it refers to your cash in the bank. Please remember if you’re reading this blog but you don’t have a business that you are nothing more or less than a one-person business. If you are not experiencing cash accretion, Zero could be at your back door. Awake from complacency, assess and manage every cost downwards or out of the system, and then re-build your cash reserves.

I say this many times but it bears repeating. Quoting Jack Welsh, “Take control of your life or someone else will”. In this blog I have offered some advice to stir any complacency and ensure the health of your business. In Part 2, I will continue this down-to-earth message as we all cope with very low economic growth. “This too will pass”, said Og Mandino and the one thing I know is that despite the tough times [Mr Gordhan says two years], we can and will come out stronger.

 

Yours in Property.

WHAT ARE PROPERTY TRANSFER COSTS?

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Buying or selling a property is probably the biggest financial commitment you will ever make in your lifetime. But naturally we can get so wrapped up in emotion when it comes to buying/selling a property that we rarely take the time to research other costs involved. This is why we strongly believe that it’s crucial to fully understand all the factors that go into influencing the purchase, no matter how overwhelming they might seem at the time.

When you decide to buy a property, the conveyancer or transfer attorney will start to prepare the transfer documents on receipt of the title deed, personal details and confirmation that all conditions have been met by both parties. The attorney will then start the process to register the transfer of the property in the Deeds Office. The transfer costs that you will have to pay are made up of four main fees that you will need to pay to the transferring attorney who in turn will pay the respective parties, including themselves.

The transfer costs are as follows:

1. Conveyancing fees

These fees are payable to the transferring attorney for carrying out the legal procedures required to change the ownership of the property into your name and for generating all the necessary documentation. The amount is calculated on a sliding scale based on the purchase price of the property and is the only one of the transfer costs which is negotiable. In the event of the transaction being repeat business, then attorneys may consider a reduced charge. It is worth bearing in mind that conveyancing fees are subject to VAT.

2. Administration fees

This is a set, non-negotiable minimum fee paid to the transferring authority for costs relating to the Deeds Office search, to verify the respective parties for FICA and for petty cash expenditure such as postage. The FICA verification has to do with compliance with the Financial Intelligence Centre Act which requires the attorney to verify the identity and address of the parties and in the case of you, the buyer, the source of funds for the transaction. VAT is also applicable in this case.

3. Deeds Office fee

This transfer cost is paid to the transferring authority which will then pay this over to the Deeds Office. The Deeds Office requires this fee as a result of their having to update their records. The way it is calculated is according to the purchase price and is neither negotiable nor subject to VAT.

4. Transfer duty

This tax is payable on transfer of the property and is paid to SARS by the transferring authority. It is calculated depending on whether the property is registered for VAT or not. No transfer fee is required if the purchase price is below R750 000. A property exceeding this amount will require a transfer fee calculated according to a sliding scale. If the property is VAT registered, instead of the transfer fee, VAT becomes payable on every rand of the purchase price calculated at 14% of the purchase price.

5. Clearance certificates

There are also costs that you, as the buyer of a property, will have to pay related to clearance certificates which are arranged and collected by the transferring authority. They will then pay SARS for the tax clearance certificate and the local authority to verify that there are no outstanding rates and taxes payable by the Seller. Without these clearance certificates as proof of payment, the transfer cannot go through.

So if you are in the process of buying that special home, take heed of what transfer costs are applicable to your case.  We believe that what is crucial at this junction is to choose your estate agents with care and make sure your homeloan consultants have expert knowledge of local conditions, trends in property prices and the resources to provide you with all the facts you need to make important decisions. You need to partner with a company that will put your needs first, honour the relationships you have set up with an estate agent and provide you with a sense of belonging to a dynamic team. Then you too could be well on your way to purchasing that special property for you and your loved ones.

 

POLITICS INTERSECTS ECONOMICS

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So much to say really.

Many years ago I was on a train in Singapore speaking to a well-known local. Discussing the phenomenal success of that tiny island, I asked him what caused it. His answer: Political Leadership. For all my studies in economics, I nearly laughed at the idea. But he was right – in fact, spot on. The famous Lee Kuan Yew, the first Prime Minister from after independence in 1959 up to 1990 created the vision into which Singapore grew. The motto of Singapore is: Onward, Singapore, and anyone who has been there will know it has been “onward” for decades now. In Singapore, the best high school students are chosen in their final year for studies abroad. Sent to Yale, Oxford and the like, they are funded by government and then return to be employed in government, for the sake of the nation. Probably best known for its Changi Airport which wins “Best Airport” year after year, on any day you can see 800 ships in the Singapore harbour [not a typing error – 800!]. Measuring 50 by 27kms [I guess, from Joburg to Benoni and as wide], it boasts the 3rd richest GDP per capita in the world – >US$87762 [R1235400 per annum – also not a typing error at R14.20 to the $ today – and nearly the most productive Peoples on the earth!]. Clem Suntner pointed out in his High Road Low Road scenarios years ago that Singapore has no natural resources. In fact, they don’t even have fresh water on the island and import water from Malaysia and then export purified water back to them. So, to end this little section, Politicians drive economies WITH all the other players. Government’s role is to set the scene for successful, equitous business.

Enter Hilary and Donald. It amazes me that the great continent of North America could not deliver better opponents than these two. I will make no judgement other than that, in case I offend a strong proponent of either, but statistically I am accurate in what I say as all the polls indicate clearly that they are not liked and choosing between them at the polls is going to be solely “an act of duty to vote” for about half of everyone that votes. How scary is that? Never in history, two such un-liked candidates! But, they have a massive influence on what happens in our economy. What the winner does to our Rand is speculative at this stage. Some commentators indicate that Donald will collapse the US$ at least until America becomes “great” again. Hilary represents the status quo so probably little will change. So, I guess, if she wins we will be more “business as usual” and I sense she will be less likely to press The Big Red Button so that is comforting. However, I do sense that Donald would do some deals that put America in control of certain things again. Politicians do certainly drive the economy.

So how do politicians influence the economy? They drive the economic imperatives of a country. Heard of the National Development Plan [NDP]? For better or worse, it was the gift of Trevor Manual to SA Inc when he decided to spectate, I think, for a while. The NDP is a serious plan agreed to by all parties on- and off-shore for the manner in which we rally business, government, labour and even, societies in order to bring about Growth and alleviate Inequity in our country. Unfortunately, it is only referred to at the odd time when the international Press and role-players may be listening as the ANC is fighting battles completely introspectively. In all the “shenanigans”, [not my word], unfortunately, the Poor come off second-best and the rich go to Court. The tragedy in SA Inc is that we have a backlog of Inequity and every quarter we fail to make an economic difference, we pile the troubles on the heap. So now we have overtaken the Lost Generation of the 80/90’s with the Missing Middle of the 2000’s. Many willing people, side-lined by economic history, by the politicians, to the heaps of financial despair. Not your problem, you may say, but you are wrong. Your taxes are supposed to be raising the per-capita GDP [read Singapore above] by educating, keeping healthy and employing the peoples of this fair Land. When politicians are corrupted, populous and immoral, the Poor become poorer and the Rich, well, they just try to keep up with the declining Rand by investing offshore or not at all. I am a blue-dyed capitalist in case you wondered but in a fairy tale world, benevolent politicians and businessmen could make a huge difference. Singapore was a fishing village with a Centre of Trade mentality in the minds of its leaders – as a result, everybody won and many leaders became revered in their lifetimes.

For those of us confused by Economics, I often refer to it as E-comics or the Study of Graphs. Then, all you have to do is decide if the direction of the line on the graph is good or bad. Cost line rising = Bad; Profit line rising = Good, and so on. As I have said in a previous blog, I am not fazed by the current Real decline in housing prices. Affordability improvement will result if the Banks agree to keep lending on their current criteria. Some of the messaging coming from leading economists about the Rand after Pravin was charged by the NPA, I found very encouraging. It would seem that even a downgrade, would not radically affect the Rand. As much as S&P has warned that the “noise” of South African politics is very concerning, it would seem that if we can retain Treasury and the SARB as definitely independent, we could even ride that storm for the Rand. Heaven knows, that set of decisions rests squarely in the hands of Jacob Zuma. A reshuffle that affects those two men will be shocking; but, on the other hand, if he keeps things the way they are, we may be spared a downgrade [from 25 November 2016 onwards], just because we are seen to be a stable democracy. Knife edge stuff so just keep watching the graphs.

You may think I’m rambling, but I’m not. Facts are what they are but what you do with them is your world. There is a simple assertion called Locus of Control [LOC, for short]. An External LOC simply means that you see the world from outside in. An Internal LOC means that you see the world from inside out. Neither is right in the sense of personal morals or strengths but they have a fundamental effect on how you see and create your world. An external LOC deems that your circumstances influence your success. Bad circumstances – the economy, politicians, graphs going in the wrong directions, interest rates, relationships – influence you negatively. You are a product of your circumstances and you can do little about it. “Hou Moed” [Stay Strong”] is your mantra until things blow over and you are free to be successful again. And internal LOC takes the view that your circumstances need to be challenged. “I Can and Do” is your mantra as you keep your feet on the ground and reach for the stars. I mean, let’s face it in any given economic or political environment, there are those who prosper and those who fall. When the property market rises, estate agent numbers swell in pursuit of the “easy buck” and then, when things quieten, the numbers decline and the stalwarts remain. Not as strong financially as before but strong nonetheless. Hard work, positive self-expectancy and enthusiasm are energies. They define who we are in every circumstance and give meaning to:

  •          The fact that my hard work is habitual and necessary for success in anything, at any time.
  •           I expect that from what I sow, I will reap and that any Cause I pursue will have an Effect; the law is universal.
  •          The saying, “If you’re happy tell your face” drives enthusiasm.

To the last point, the Nobel Peace Laureates, Desmond Tutu and Dalai Lama, per Carte Blanche last night, have written a book called Joy. It simply speaks to how, despite the circumstances, you can remain Joyful. I can’t wait to read it as a supplement to the other Great Book from which I draw inspiration daily.

HLJ stands by to work with you, encourage you, assist you and build your business. It is not easy but for more than 13 years we have been doing it in every possible economy and under every kind of political leadership you can think of. We have survived and prospered in many circumstances and stand by to share our experiences with you.

Yours in Property.

SO WHAT’S YOUR PROBLEM?

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I have a daughter who is retarded. A combination of Downes Syndrome and Autism has made her different. She is beautiful, but can be unpredictable and hardly ever talks. We love her, plain and simple.

She lives for three weeks a month, in a private home in Vredenburg that cares for 52 other children [read: fully grown but retarded adults].

[Just a complete aside, it always interests me that we now have our daughter in a private facility. Many of us have private health care/security/creches/schools/hospitals/road accident insurance etc but to have a non-government subsidized, private home for the mentally challenged is quite new to me. This train of thought makes me wonder when Curro will launch its first private university. It currently has pre-primary, primary, secondary and A-levels so why wouldn’t it build a university? Monash from Melbourne, situated in Roodepoort, is fully private already so the idea is not new. And with some donor funds, Curro could do the unthinkable and house want-to-go-offshore university staff in a practically non-profit organisation. Very interesting thought even if I say so myself J]

Back to the train of thought…..

In her village is a man called Martin. He and I have got to talk and I must say, after leaving there, you realise Martin could be doing work anywhere and qualifying as “disadvantaged” from a BBBEE point of view. He is handsome, mature and smart but probably has a less obvious mental challenge somewhere. His Mom made an arrangement with the owner that she would build on a wing that she and her family would bequeath to the owner of the property upon their deaths. She has passed away already and left Martin to help care for his badly mentally and physically retarded sister who is wheelchair bound. Martin does that with care and concern, dedicated to seeing that his sister is clean and well fed every day. The story deepens as you look through his collages of photographs on the cupboards and walls of his bedroom. His Mom, sister and himself in happier times; his uncle, a Professor of things technological in Vancouver, Canada of whom he speaks with high praise and admiration; pets who have joined their journey from time to time. And little sayings……..one of which, on an old, worn plaque, that really caught my eye:

I may not be perfect but Jesus thinks I’m to die for!

If it resonates with your theology, mentalize it for future use. We all need encouragement sometimes. If it is contrary to your theology or absence thereof, please just bear with me so that I may make some points.

My first one is this: So what’s your problem? Martin doesn’t even see his situation as regrettable. He’s just too busy honoring the memory of his Mother by caring for his sister. And that mother, spare a thought for her – two children and both challenged. Her only consolation is that she could spend her last days in their home with them. Wow, how blessed are we to not be her! – so, what’s your problem? A little fat roll here or there, a tough business environment where Business Confidence has just dropped to its lowest in 30 years [1986 or thereabouts would have been the famous Rubicon Speech era], sales slowing, banks tightening, aches and pains of older age? What is it that so easily besets you and I? Martin has a view that in his imperfection he still has a higher cause, a reason to be and a job to do and I can tell you, he just does it unmurmuringly every time I see him. I marvel at him frankly, and he is certainly no spring chicken himself any more.

My second one: I unashamedly watch America’s Got Talent. Every season, every show, as much as I can. I see the epitome of human achievement. Like art, some of it I find unappealing but, also like art, some of it appeals to me in no uncertain terms. As a coach, I love to experience those, who in the beginning of the show, really believe “they have it” but really don’t. Old wrinkled people who feel stardom as the judges sensitively allow them their place in the sun, braggers who just try to be stars and quickly dim into ignominy. Then there’re those who start small and learn amazingly quickly, growing themselves into potential winners. One of them is Jon Dorenbos, the ex-NFL player now turned magician, who shared a little of his journey one night last week as he held me spellbound on up-close TV making cards rise out of a pack – I mean, HOW does he do it??. He has obviously bravely survived Adversity and found solace and strength in his ability. He said something I have taken to heart: Don’t listen to yourself; talk to yourself. Man that’s powerful! I’ve had the chance to watch some footage of the student protests [which probably gave rise to my Curro University idea[?]] and listened to my thoughts ie in my own head. No need to tell you what I was thinking about the abuse of my alma mater and other centres of tertiary learning. But then in came my son talking on WhatsApp with such sense and sensibility that I listened to a different narrative – indeed, a narrative of someone who seems to understand the long-view, who loves his country, wants to stay here to see it prosper and have his children here. Note, not because he has to, but because he wants to. You see, what he talks to himself is radically different to what I listened to in myself. Get my drift? Martin doesn’t even take the time to listen to negativity and neither does Mark – one challenged and the other completely normal; it makes no difference. The question is only: Are you listening to yourself or talking to yourself?

My third one: How would you feel if you were Pravin Gordhan? On 4 October, FIN24 quoted the Minister of Finance as saying to Bloomberg TV in New York, “ the police investigation against him is nothing but political mischief and will be resolved soon. Yesterday he gets informed on public TV, by the Director: NPA, that he is being charged with other co-accused for Fraud. In hearing it, he tells a Breakfast Meeting he can’t understand why this happens just before a most important mini-Budget.

Bravado? Challenging of the NPA? Or, simply the truth as best he wishes to understand it?

I’m reading a book in which CS Lewis is quoted as saying: Reason is the natural organ of truth; but imagination is the organ of meaning. Premised in his thinking is that stories can align reason with imagination and mind with emotions. If I’ve lost you, please forgive me but here is what I’m saying. As you think and give reason to matters and issues, you create truth which is your own truth. But that narrative in your head, does not become meaningful unless you begin to imagine it. You’re walking down an alley in the dark and suddenly, you hear a noise [Reason gives Truth]. Someone is following you, goose-flesh rises on your skin as your heart races and Adrenalin injects into action [Reason intersects Imagination]. You know you’re being followed and consider fight or flight [Imagination results in Emotion]……..and then the cat appears from the rubbish bin……….and you go on your way, sheepishly.

What is the narrative that is becoming your Reason? And how is your Reason fueling your Imagination? Is your imagination tending to Catastrophe? The psychologists have a term for this: Catastrophization [read: the tendency to believe and always express the very worst outcome from a particular set of circumstances]. You see, my son has the ability, even better than my own to be very honest, to not allow his Reason to develop a truth which leads his Imagination to drive his emotions; he’s not insensitive, just reasonably less emotional. You could say, he has high Emotional Intelligence in many areas. And what about Martin?

How’s yours today? If you were Pravin Gordhan in front of cameras, would you be sweating or just referring to what even moves the Rand, as “political mischief”. In doing so, would you have eased the tensions of thousands of Investors in SA Inc? What “mischief” is playing with your mind as you make it “your truth”, perhaps, in complete error?

There are so many stories you and I could tell. Stories of great courage in the face of insurmountable odds. Stories of people, teams, animals, and businesses, all of which have survived against the odds because of impeccable leadership, sometimes, your own leadership. You see, leaders “trade in Hope”. They reason their truth, imagine it through and despite that edge of goose-flesh, begin to lead with hope, care and confidence. More times than not, they overcome and live to tell the tale. Self-leadership is the genesis of all leadership so become and be the leader you wish to see in your circumstances. Nothing can take away your dignity; it is and will always only be yours to give away.

Homeloan Junction may not always get it right. But to the best of our ability, we commit ourselves to overcoming any odds, talking instead of listening to ourselves, and controlling our reasoned truth with a good dose of emotional maturity.

So, I ask in conclusion, what’s your problem? Lift your head and your eyes will follow to Hope.

Yours in Property.

THE LAST BIG THING

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I have a friend who uses the term: The Next Big Thing,  quite often. It intrigues me as a concept.

However, the Last Big Thing is what I’d like to discuss quite briefly today.

In our previous blog I surmised the possibility that rates, both here and in the USA would remain the same. They did. I wrote:

So we have Interest rates stable or well managed, Inflation hopefully will peak and decline a little and Employment will remain soft but stable. If that is true, then Affordability comes into play. You see, cost prices of houses are declining. Therefore loans-to-values will increase. Therefore there will be a few happier credit managers around the place prepared to take a better view of your customers’ mortgage application. Affordability will kick into play – all of the positive, easy-to-feel effects of a Consumer more capable of paying for houses whose prices have decreased. Now that’s good news.

I was correct on the rates so the question now remains whether affordability will improve over the medium-term. That we shall see.

But this matter of stable interest rates is certainly “the last big thing”. In the USA, it means that the Federal Reserve is concerned that should they raise the rates they may snuff out the growth they are enjoying. This is double-edged – on the one hand the cost of debt remains stable and historically low. But, on the other hand, it implies that the FED is concerned that growth is not vibrant and could be nipped in the bud.

As a result, the stock markets react quite negatively to the news. In fact, they rise when the oil price rises as historically, this has meant higher demand from industrialized nations. In the old economies, prior to Sub-Prime 2008-10, a rise in oil prices predicated a rise in interest rates as economies were growing and inflation needed to be tempered. These days, the oil price is driven more by Saudi Arabia deciding on production levels – at the moment these are creating an oversupply.

As regards rates, Quantitative Easing [QE] [read: printing money] is driving the interest rate discussion. In a recent article I read, in the USA $3trillion of QE has occurred and still the economy is sluggish. This is a quandary for the FED and hence the reticence to raise rates. Bear in mind that whilst we talk about America, there is hardly a leading nation that has not QE’d their way out of Sub-Prime. Some described Sub-Prime as a seismic shift at the time [as they have recently also described Brexit]. Fact is, it was, and the hangover still remains. One good thing for us is that the US$ is a little weak and so that helps us in our imported inflation, especially the cost of Oil.

So what does The Last Big Thing mean to us in South Africa?

  1. We can enjoy the respite of, at least, stable interest rates.
  2. We continue to enjoy relatively inexpensive fuel.
  3. Our inflation rate is under control.
  4. We allow ourselves a little headroom to accommodate our poor politics.
  5. We gain from commodity prices wherever these occur and enjoy coming off very low bases.
  6. It helps with further unemployment.

Downgrade risk aside, our real problem is the long-term effect of Zero growth. In my memory, I cannot remember when we have endured such a long period of <1% growth whether the higher rate of growth was organic to our economy or induced by the intervention of Financial Authorities. But in the meantime, volumes of homeloan sales are performing relatively well compared to last year whilst house price increases are slowing. My Affordability theory is therefore still possible. Not a bad place to be under the circumstances.

I guess, all said and done, it’s going to come down to our attitude, commitment and hard work. Homeloan Junction may understand the economic situation but refuses to comply with its rules. It reminds me, many years ago in Nedfin Bank we had a saying in recessionary times: “We have heard there’s a recession. We refuse to take part.” There isn’t a recession in South Africa but even if there was a sniff of it, Homeloan Junction refuses to take part.

Yours in Property