‘To­tally in­ef­fi­cient’

Finweek English Edition - - Letters -

IT WAS IN­TER­EST­ING to read I’m not the only one stuck with this prob­lem. The ac­count for my 3G is around R250/month. In Novem­ber 2008 I re­ceived an ac­count for R1 500; and then in De­cem­ber one ar­rived for R3 500. Just like Ja­son My­hill (Let­ters, 22 Jan­uary) I’ve had no co-op­er­a­tion from MTN – many calls, pleas, com­plaints on “Hello, Peter” are all sim­ply ig­nored. When I in­sisted on speak­ing to a man­ager I was told MTN’s man­agers don’t take calls. And even team leaders refuse to deal with calls.

Though I have sev­eral ac­counts with MTN, clearly my con­tri­bu­tion to their prof­its isn’t enough to war­rant at­ten­tion. I can’t even get a detailed ac­count from them. It’s clear MTN is to­tally in­ef­fi­cient in pro­vid­ing clients with ser­vice or pro­tect­ing them from crime. I can’t help won­der­ing whether there’s fraud go­ing on at MTN. in­vest sub­se­quent to the mar­ket crash in Oc­to­ber 2008, I’ve been fol­low­ing the mar­kets ea­gerly (fi­nan­cial mag­a­zines, news­pa­pers, ra­dio talk shows, etc.) try­ing to get a ba­sic un­der­stand­ing of what the hell is go­ing on. Very in­ter­est­ingly, not all the economists/ stock­broking firms agree about how long the cur­rent re­ces­sion will con­tinue or when the turn­around will be­gin. The worst-case sce­nario put for­ward so far is that the re­cov­ery will only oc­cur in 2012.

All the broking firms keep telling in­vestors now is a good time to buy. Share prices are low and good value can be found. All the broking firms also have the fol­low­ing in com­mon: “Keep­ing your money in an in­ter­est-bear­ing in­vest­ment now isn’t wise. Three things count against you in do­ing so: in­ter­est rates are com­ing down; tax on the in­ter­est earned re­duces your ben­e­fit even fur­ther; and the im­pact of inflation erodes your in­vest­ment over time.”

At­tached is an over­sim­pli­fied cal­cu­la­tion of my own com­par­ing shares and in­ter­est. I don’t have all the facts as to what the broking firms ac­tu­ally do (how much ad­min­is­tra­tion charges, etc, do they ask). The at­tach­ment has three sheets: My as­sump­tions in do­ing the cal­cu­la­tion; in­vest­ment in shares; and in­vest­ment in an in­ter­est-earn­ing de­posit.

I need to re­peat th­ese as­sump­tions are over­sim­pli­fied. Bear­ing that in mind, due to the value lost in ad­min­is­tra­tion costs/com­mis­sion paid to the broking firms it ap­pears as though it’s ben­e­fi­cial to leave your money in an in­ter­est-earn­ing in­vest­ment. I’ve learnt this so far from fol­low­ing

the mar­kets:

the broking firms ad­vise in­vestorstors tors to buy while good value can be found. ad­vise in­vestors to buy be­fore it’s too late. Share in the eu­pho­ria while it lasts! broking firms ad­vise in­vestors to buy. The only con­clu­sion I can reach for that ad­vice is this: they need Joe Av­er­age to in­vest, oth­er­wise they don’t earn any new/fur­ther com­mis­sion. Are we be­ing bull­shit­ted? My con­clu­sion: First, Joe Av­er­age, who has a ba­sic un­der­stand­ing of how the mar­kets work, should do his own in­vest­ing.

Sec­ond, Joe Av­er­age, who has zero un­der­stand­ing of the mar­kets, should just leave his money in the high­est in­ter­est-earn­ing ves­sel avail­able.

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