9 May 2013

Eurozone banking - prepare for the Big One!

In 2005 I warned in another blog that to keep one's money in Italian government bonds that yielded a paltry 10 basis points more than German Bunds was not sensible. Now that a certain sense of normality has returned to financial markets in the Eurozone it is easy to forget the major risk that still exists when the next Euro-Quake hits the headlines. Investors have a short memory - only two months ago depositors in Cypriot banks were unilaterally stripped of (part) of their wealth. So I would urge any reader to consider transferring his bank deposits into Eurozone countries that can be considered 'safe' (hopefully there are some that deserve that description). Interest paid on deposits is ludicrously low in all countries so there is very little loss if money is moved out of vulnerable countries and their banks. But the upside is substantial as any break-up of the Eurozone would lead to major losses in the currencies of the countries that are forced out. So depositors are basically getting a free option.

8 May 2013

Financial Planning for the Less-than-Rich

Many Financial Advisors are only interested in customers that have a relatively large amount of investable assets. Some firms cater to the Rich or Super-Rich only and require an account balance of $ 5 million or more. But as the trend to fee-based advice gathers speed there are a number of alternatives evolving that will make it possible to get sound advice with a much smaller nest-egg. Pre-condition will be that the investor is able and willing to do a certain amount of self-education on matters financial. The old say that people spend hours choosing the next washing machine but hardly spend any time on important investment decisions should be a warning.

No Stock Bubble, but Crash may come later

So speaks a 'Celebrity' economist. It is not unusual for market pundits to hedge their outlook in a similar fashion and leaving the hard decision to the investor. Forecasting is difficult - especially if it is about the future. So we have some sympathy for the 'experts' that are constantly badgered by the media to have view on the markets on a daily basis. But investors are well-advised to hedge against any market development by using intelligent risk management when investing for the long term and not be distracted by what is in essence public relations and/or entertainment.