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How much higher can stock markets go?

I have reduced a lot of my investments in the Stock Market at the moment, because I think that prices are already very high.  I don’t see much room for the market to grow at the moment, but that does not mean, for example, on our local market that Rand hedge shares cannot go up.  That is shares which, every time the Rand decreases due to the investments, see their price going up.  If you are a long-term investor, whether in your retirement annuity or in terms of putting a monthly contribution into the Stock Market, then I would certainly carry on doing that, but the market had such a tremendous run since the lows of 2008 when I wrote in my legal newsletter that anybody buying at that time just could not lose, the things cannot possibly go up over the next 10 years as much as they have over the last 10 years.  So many markets are at all time highs, not just in terms of their price, but relative to the earnings of the companies I think the market is now much more dangerous than it has been at any time in the last 10 years.  That of course does not mean it cannot go up – I don’t believe in Bitcoin at all either and I don’t think Bitcoin has any real value, but that does not stop people speculating in it.  

I just think if you are a person who believes in long-term value in terms of buying shares based on what the profits of each company are that shares are very expensive now.  A few years ago, by way of example, you could have bought Apple shares at a considerable discount relative to their earnings than what they go for now.  I guess what I am saying is that a few years ago the markets had screaming value all over the place, but right now most global economies, other than the South African economy, are running at full speed, companies are making bigger profits than ever before, they had the benefit of tax breaks in the US, and all of these things are unlikely to be repeated in another year’s time, so I just don’t think that in 2 or 3 years’ time we will be talking about a market that is 30% or 40% higher than the current market.

Posted by Michael de Broglio on Thursday 28-Jun-18   |  Permalink   |  18 Comments Comments Share on Facebook   Tweet It
Legal secretary worth R101,6 million

I was really astounded to read an article recently about the death of a lady called Sylvia Bloom.  A legal secretary in New York who, when she died, made the largest donation ever from an individual to a social service group in its history when she gave them $6,24 million.  She was a legal secretary in Brooklyn who worked for the same law firm for 67 years until she retired at the age of 96 and died shortly thereafter in 2016. 

She did not appear to tell anybody about her money, she left some money to relatives, but directed that the bulk of her fortune goes towards the scholarships of needy students.  The executor of the estate and everybody else said they were absolutely blown away by how much money she had.  They explained it this way, and please note that the total she was worth when she died was $8,2 million and I have based my heading on an average of R12,40 to the Dollar – obviously the Rand amount changes everyday.  I think her loyalty to one firm and listening very carefully to everything paid off.  She was a secretary, as they explained in numerous articles, in the day and age when secretaries often used to be responsible for conveying their bosses’ instructions to stockbrokers as to which shares to buy, which shares to sell, etc, and she obviously worked for a very bright man who handled his investments well.  Whenever he bought a share she would buy the same share as well and she learnt from him.  That, together with an approach of saving everything and not spending wildly, left her richer than most of us can ever imagine being. 

Certainly, none of us would ever imagine that a legal secretary would end up so wealthy when most attorneys will not even come close to a quarter of that, no matter how successful they are.  The other side of the story is of course a work ethic – when you hear somebody kept working until they were 96 years old, you are dealing with a special individual in the first place!  It is uncanny that once she retired she died.  The same thing happened to my Gran – perfectly healthy while she worked, but she died 6 months after retiring, so it feeds into some superstitions I have about early retirement.  If you are having fun and making money there is no reason to sit at home and play golf 7 days a week. 

Posted by Michael de Broglio on Monday 25-Jun-18   |  Permalink   |  22 Comments Comments Share on Facebook   Tweet It
A useful app - Strava

I mentioned Strava in a recent blog of mine and it is a particularly useful app that you can use to measure any sort of workout.  It does come at a yearly subscription fee and it made world headlines recently when it came out that American military personnel, walking around secret bases, were essentially publishing their routes through the app that they run and walk, which could be useful to enemy combatants through their use of the app.  I think Strava had to make some changes so that it no longer publishes that information in security sensitive areas, just showing you how ingenuous the spies are when it comes to trying to gather information as to where buildings, etc are! 

Strava can be used to plot any workout, but it is most useful for outdoor walks, hikes, running or riding a bicycle.  The data becomes particularly useful if you use it in an area, as I do, where a lot of people ride bicycles.  You can, for example, compare what your time was over a stretch of the road to all of your times that you have ever ridden over that stretch of road, to other people of a similar age category, similar sex and similar weight category!  I don’t seem to make the top 10 on any of those lists, but I think that is because I am not riding a proper racing bicycle and while I am spinning my wheels at the same speed as guys who are going past me, I need to upgrade to a serious racing machine!  Obviously, the app is doing all this work.  I start it at a beginning of a ride and I end it at the end of the ride.  I am not timing the different segments, but those segments have been broken down by different people to give certain hills and certain names and when you get to that point, and it is obviously tracking you by use of GPS, it will start timing how long you take to get to the top of the hill and then tell you how your hill climb that day compares to your best times on that hill climb. 

For example, it tells you at the end of your ride that the one stretch of your ride was the fastest time you have ever done and another stretch of your ride was the third fastest time you have ever done.   I guess the statistics and comparing you to a lot of strangers, and sometimes people that you know is also meant to help motivate you to keep exercising.  I certainly find it useful and with the latest version of the Apple Watch, which has GPS and a cellular signal, it allows me to do all of that from my watch, as opposed to having to lug my phone with me, so it is extremely convenient.  It is very useful when you are on a run to be getting told what your pace per kilometre or per mile is for the whole race so far so you can tell whether you are going slower than usual, if for example you normally run at 7:30 mins a mile and now you are running at 9 mins a mile. 

Posted by Michael de Broglio on Friday 22-Jun-18   |  Permalink   |  23 Comments Comments Share on Facebook   Tweet It
Not all employees get all benefits

A number of people forget that in terms of section 6 of the Basic Conditions of Employment Act, people that earn a certain amount per year (and that would be the salary plus any bonus they receive) are not eligible for a number of the benefits provided for in the Basic Conditions of Employment Act.  That current amount now is R205,433.  If you divided that by 13 to reflect a full bonus, which many companies give, it works out to anybody earning more than R15 802,54 a month not being entitled to certain of the benefits – the categories from which those employees are excluded include overtime, ordinary hours of work, meal intervals, daily and weekly rest periods, pay for work on Sundays, extra pay for public holidays and night work.  In other words, only people who earn less than that are entitled to those benefits.  Those earning more than that still have certain rights, for example, they can legally refuse to work more than 12 hours in any one day, although again, there are certain circumstances where they cannot such as in what is known as emergency overtime. 

I think that is very important to note this because the basic thinking is that people who are earning a good enough salary are able, to a larger extent, to look after themselves a lot more capably and don’t necessarily need all of the protection of the whole of the Basic Conditions of Employment Act.   The Act on a whole though still discourages many foreign businesses from setting up operations in South Africa as it is not competitive with standards in the rest of the world. 

Posted by Michael de Broglio on Wednesday 20-Jun-18   |  Permalink   |  27 Comments Comments Share on Facebook   Tweet It
Factfulness - statistics

I recently started reading a book called “Factfulness” by Hans Rosling.  The book is the kind of book that would appeal to me, but it is also one that more people should read.  I am the type of person, when somebody starts telling me about how nervous they are about flying in an aeroplane, to point out that they are more likely to be struck by lightning in Johannesburg and killed than they are in an aeroplane crash.  I find there is a lot of comfort to be had in statistics. 

Of course, that does not mean you cannot die in a motor accident or being bitten by a shark, but the fact of the matter is there is more chance that lightning will strike you and kill you, especially in Johannesburg.  Most people don’t have any problem playing outside when there is lightning, and I have a number of golfing friends who want to keep playing at that time, because they don’t think anything can happen.  It is bizarre sometimes if you put the same person on an aeroplane and then they think they could have a crash, but they are quite happy to play with lightning striking 500 metres away!  A lot of people also forget basic statistics like believing every second that you count after a lightning strike and before the thunder comes means that it is one kilometre away.  If they looked up the statistics, and I’ve had them in my blog before, it is about 335 metres a second that sound travels, so if it takes 3 seconds for you to hear the thunder, the lightning is only 1 km away and you are in grave danger!  Normally when lightning is within 8 km of a golf course or the thunder is 24 seconds away they get everybody off the golf course, so 1 km is way too close for comfort and you are at risk of being struck at any time.

In any event, I was just giving that as an example of the book, and I will deal with more of it in some follow-up articles, but the long and short of it is that this book basically illustrates, through actual facts and figures, that we are living now in the best times ever.  Sure, bad things still happen and frequently do to good people like you, as Dr Seuss says, but there could not be a better time, in all history, to have been alive than now.  People statistically are richer now than ever before, people face less poverty than ever before, there are less people around the world that are starving than ever before.  Many animals that were endangered 20 or 30 years ago are making great comebacks and the book contracts how we all talk about how things are getting worse, things are bad, etc, but that such talk is ignorant – it is ignorant of the facts and you need to know your facts and your statistics, because if you know your facts and statistics you will be more likely to talk credibly about issues instead of saying how bad things are and how bad they have become when that is not the reality. 

Posted by Michael de Broglio on Monday 18-Jun-18   |  Permalink   |  26 Comments Comments Share on Facebook   Tweet It
Google Maps is improved

One of the biggest problems when you are using Google Maps is when you start walking or following the directions, you don’t always know which way to walk immediately.  Google have tackled that, in the latest version of the app, by using computer-vision technology which allows you to raise your phone and see an image of the street where you are and it will have a large arrow pointing you in the correct direction to walk or travel!  Google calls this their Visual Positioning System.  Let me know if you have tried the updated app yet?

Posted by Michael de Broglio on Friday 15-Jun-18   |  Permalink   |  34 Comments Comments Share on Facebook   Tweet It
Effects of the weaker Rand

We can see the effects of the weaker Rand as well as taxes in the recent substantial increase we have seen in the fuel price.  Unleaded 95 petrol in Gauteng is now R15,79, although most people will no doubt be using, as I do, the 93 petrol at R15,54.  The problem is, despite the substantial increase, with the Rand’s current slide they are still looking at an under-recovery for June of 54c.  Obviously, if the Rand improves, this figure can change dramatically before the end of the month, but if the next increase had to be determined now, the price would need to have another 54c added onto it to go to more than R16,00 a litre!

This again illustrates the absolute importance, despite the fact that politicians often make all sorts of silly comments about markets, of sorting out policies, getting South Africa growing again and dealing with the issue of nationalisation of land and property sensibly. 

Every time politicians rattle the cage with this type of conversation it leads to the Rand weakening, the Rand weakening leads to higher petrol prices and higher petrol prices lead to higher food prices because all of those basics have to be delivered to the shops on our roads, etc.  Ultimately that also feeds through to inflation.  The sooner the politicians can stop talking nonsense, the better for all of us who actually pay their salaries! 

Posted by Michael de Broglio on Thursday 14-Jun-18   |  Permalink   |  29 Comments Comments Share on Facebook   Tweet It
Possibly two runners in this year’s July

It is early days yet, but two horses that I bred, are currently high enough on the July Handicap log to run in the race this year.  One is a filly of Sabina Park by the name of Sabina’s Dynasty as well as a child of Festive Occasion (who some of my staff went to watch at Turffontein run many years ago and has subsequently died) called Made to Conquer.   I don’t own either of the horses anymore, I sold the vast majority of my 30+ horses during a sale in September 2017, because quite frankly they reached a stage where they were losing money every single month, but I did breed them and every time they win I obviously get a mention as the breeder.  To me, it gives me a lot of pride to have bred them as well as knowing how good their mothers were – Festive Occasion has after all already produced Do you Remember, who came third in the July Handicap and is currently pregnant by American Pharaoh, the last winner of America’s Triple Crown, in Kentucky USA.  Sabina Park of course produced Master Sabina who won two consecutive Summer Cups and has subsequently retired from racing.  It shows me again that what I believe in works, and that is that top mothers produce top children.  Yes, I sent the mothers to the best sires (or fathers) out there, but it is the mothers who did the best on the racetrack who have continually produced for me the best children.  When I send average mares to top sires, I get average foals, so to me its more about the mother.  I don’t know whether the new owners of either of the two horses will elect to run in the July, but it is likely that at least one of them will run in the July and it is quite possible that I will have bred two of this year’s July Handicap runners.  The July Handicap will be run on Saturday, 6 July.

Lastly, why did I sell?  Horseracing in South Africa is spectacularly unprofitable.  It did not use to be as bad as it is now, but honestly, even if I kept these two wonderful horses as well as all the other horses I sold last year and they ran first and second in the July, I would still be racing at a loss.  Horses cost a fortune, trainers want R8,000 a month, then there are vets, transport fees, running in the race, etc, and it gets to a situation where your accountant will ask you every year as to why you are still keeping all your horses.  The funny thing is I was always considered a “lucky owner” and well, as a lucky owner, I can tell you I was losing money.  I can only imagine how bad it has been for unlucky owners and the biggest problem is that the prize money in South Africa is way too low.  You have horses that cost R2 or R3 million that are racing to win R60,000 and when you come third in the July Handicap, as Do You Remember did, you only win R330,000.  That sounds like a lot of money, but compared to the value of the horses and what they would be worth overseas and what they are racing for in countries like Australia, that is a pitiful amount of money.  First prize in the Kentucky Derby for example would be closer to R20 million and the horse coming third will get the equivalent of R5 million, not R330,000.

Posted by Michael de Broglio on Tuesday 12-Jun-18   |  Permalink   |  26 Comments Comments Share on Facebook   Tweet It
Gmail will write your e-mails with Duplex

At its recent developer conference, Google showed a new feature called Duplex.  It is part of Google Assistant which is a voice-controlled system that competes with Amazon’s Alexa and Apple’s Siri.  Apparently, the Google Assistant is so good that it can phone a restaurant and make a reservation and the people answering the phone on the other side do not know that they are speaking to a computer.  It will apparently be launched as an experiment soon and it relies on AI, which learns automatically from data rather than having to be programmed.  Google is considered as one of the leaders in the AI field and have been working on this for the last 10 years.  The technology will predict the next words or phrases that you would usually use when typing an e-mail and suggests them to you!  Interestingly enough, Google feels that many children don’t have enough manners these days and children will be encouraged by Google Assistant to say “please”  to Google Assistant.

Posted by Michael de Broglio on Friday 08-Jun-18   |  Permalink   |  28 Comments Comments Share on Facebook   Tweet It
Instagram and cyber bullying

A lot of the Internet companies are obviously looking at cyber bullying at the moment.  The use by the Russians during the 2016 elections in the US of Facebook in particular has obviously drawn a lot of attention to the big tech companies in a way that people can exploit them.  I noticed on one of the recent updates for Instagram Version 44.0 in the description of the update in the App store, that Instagram now filters out bullying comments which they say are intended to harass or upset people in their community.  They say the platform has always prohibited bullying, but now Instagram itself actually has built in certain technologies to try and address this.  I think we are going to see lot more of this being rolled out by a variety of companies, especially as Artificial Intelligence or AI becomes more and more advanced.

Posted by Michael de Broglio on Wednesday 06-Jun-18   |  Permalink   |  34 Comments Comments Share on Facebook   Tweet It
Inflation heads up, but it is still low

As a result of the increase in VAT and the petrol price going up, inflation has risen slightly.  It was 3,8% in March and has now increased to 4,5% in April.  That is obviously comfortably within the South African Reserve Bank’s upper limit of 6%.  The good news is that a lot of basics have seen their prices come down. For example, bread prices are 3.7% lower than one year ago and bananas and oranges are now 10% cheaper than they were one year ago.  Over the last few years inflation has averaged between 5% and 6%, so it really dropped quite a lot to get down to 3,8% and 4,5% is still certainly lower than it used to be.  It is obviously a positive sign in an economy.

Posted by Michael de Broglio on Monday 04-Jun-18   |  Permalink   |  29 Comments Comments Share on Facebook   Tweet It
Born in South Africa - golf winners

Something quite unique happened on the PGA Tour this past weekend.  For two weekends in a row, somebody born in South Africa won the typical $1 million first prize for winning a PGA Tour event.  The first was Aaron Wise, a 21 year old, who was born in Cape Town and whose parents moved to America when he was 3 years old.  He looks like one of the new rising stars of golf having come second only a week before that, so this was not a flash in the pan result. 

This past weekend, Justin Rose, who was born in Johannesburg before his parents emigrated to the UK, won. I think that is quite unique, two weeks in a row, for the major golf tournaments in the world to be won by people born in South Africa, but who are no longer South African. 

It also illustrates to me that we are seeing more and more people that I think is correctly described as children of the world.  In other words, if I look at Justin Rose, who represents Europe in the Ryder Cup, it is hard for me to accept, given that he was born in Johannesburg, that he is now just British.  He does not even live in the UK – he moved first to Florida in America and from there he moved just off-shore Florida and lives in the Bahamas which is obviously for the reason of saving a lot of money on taxes.  The Bahamas are barely a 45 minute flight from Florida and so it is very hard for me to see Justin Rose as anything but a child of the world.  He represents Europe in the Ryder Cup, but he was not born in Europe, he was born in South Africa and he does not live in Europe spending most of his life either in the Bahamas or America.   

Posted by Michael de Broglio on Friday 01-Jun-18   |  Permalink   |  21 Comments Comments Share on Facebook   Tweet It

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Johannesburg based attorney specializing in personal injury matters including Road Accident Fund claims and medical negligence matters. My interests include golf, reading and the internet and the way it is constantly developing. I have a passion for life and a desire for less stress!
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