19 September 2011

Is Switzerland a safe place for your Money?

Recent reports about Swiss financial institutions refusing cash disbursements when clients demand them cast a very long shadow on Switzerland as a safe location for investors that traditionally have seen it as a bulwark against authorities in their native countries. We leave it to our readers to work their way through the various agreements between Switzerland and other countries (see for example the agreement with Germany) but the fact is that these are rubber paragraphs where the interests of the investors are right at the bottom of priorities and the interest of an overbearing state is right at the top. We would add that a perusal of the 'interpretation' by the Swiss Banker's Association or a 'position paper' issued by the Financial Regulator does not inspire more confidence either.

10 September 2011

Slippery Slope to expropriation?

Reports that authorities in certain countries have begun to limit or control the purchase and sale of gold indicate that the political kleptocracies ruling in most countries will stop at nothing to keep their wasteful spending policies going. As always, the lame excuse of combatting money laundering provides a convenient fig leaf - when the whole world knows that ill-advised government policies are the real cause of most - if not all - major crimes.

9 September 2011

Who shall teach your kids the facts about (financial) life?

Providers of Financial Advice are falling over themselves to teach the kids of rich families how to handle their affairs when they are faced with the challenge of managing substantial businesses and supervising the investment of substantial family fortunes. We would caution against entrusting banks and money managers with this educational task and advise families to find providers without an obvious conflict of interest.

4 September 2011

Professors and Stock Markets don't mix

The (securely tenured) economist Robert Shiller seems to need some help in understanding stock market movements. In the New York Times he tries to explain the recent stock market volatility. But if he - or anyone else - thinks that this volatility was anything particularly exceptional he should just have a look back and he will find that the Cuban Missile Crisis of President Kennedy's stand-off with the Steel Industry in the early sixties also caused sharp sell-offs in the stock market. In the big picture a drop of 15 or even 20 per cent is nothing out of the ordinary. Any investor worth his salt knows that markets tend to decline more rapidly than they rise and if anything should be glad that he is offered the opportunity to acquire shares at much reduced prices.

3 September 2011

Safest Asset in the World?

The well-known economist Robert Shiller claims that his number one investment recommendation would be inflation-protected treasury securities (TIPS as they are usually called in the US). We beg to differ as he implies that there is no risk of government meddling with inflation statistics - or worse, the wholesale repudiation of the promise to link interest payment and principal to the value of the currency. In light of recent econonmic developments in many major economies we suggest that blind trust in the honesty of politicians is untimely.

2 September 2011

Bond Funds - are they worth the fees they charge?

You certainly do not need an investment manager to hold your assets in cash, but should you pay a fund manager to manage your bond investments? and if yes, how high should the fees be that you pay for looking after this asset class.
An interesting article reviews this problem but we would rather have the investor focus on the fact that the selection of the right asset class (cash, bonds, stocks, currencies and possibly commodities, not to mention property or direct investments) is the main driver of long-term investment success.
Tinkering with the selection of assets within each asset class is an important challenge but should always play second fiddle to the selection of the right asset mix.