Media complicit in IPO hypes

Time and again one reads headlines such as this one: 'Burger chain gears up for $568 Mio. float'. This one is from CityAM and refers to the planned IPO of another Burger Chain. Apart from the question of how many such chains the world really needs - and the question of the benefit of eating too much meat, especially red meat - one has to wonder why the reporters do not take the trouble to look more closely at the purported 'valuation' that is implied by such a headline.
It is quite understandable that the lucky few among the original promoters behind the business and their (well-paid 'advisers') would put such a 'valuation' into circulation. This is known as 'anchoring' and is a well-known trick used by any wily negotiator. But by repeating this number without any proper analysis of its merits the commentariat is making itself complicit in giving this 'valuation' the appearance of correctness.
Looking behind the scenes in this particular case should give any experienced investor who is not just a momentum player or index hugger pause for thought.
Shake Shack had total revenues of just $ 82 Mio in the nine months to September 2014 (up from 58 Mio in the year ago). Net income was a grand total of $3.5 Mio (4.9 Mio) and Net Equity was a less-than-impressive $14 Mio. All that from 53 shacks (33 a year ago).
Now there have been some hefty valuations in the fast-food business during the recent past and Chipotle Mexican Grill (ticker CMG) continues to trade at vertigo-inducing levels. This may or may not be the correct 'valuation' for a fast food chain. History will sort this out.
But it would be only good journalism if news items about new share issues would be treated as more than just re-hashed publicity items. Much emphasis is being put by policy wonks on the importance of fostering wider share ownership as part-solution for the evolving retirement crisis many baby boomers and succeeding generations will face. Giving them 'access' to new issues trading at stratospheric levels will only benefit the (early?) retirement of the 1% - or even only the 0.01%.

Are IPO's more than Get-Rich Scheme for the Promoters?

Looking at valuations imputed by the pricing of new issues one can only wonder if saving to invest in Equities can really ever provide a solution to the looming retirement crisis or the widening wealth gap between the rich and the rest of the population. What is really sad is the willingness of the media to be nothing but a marketing platform for the promoters of new issues. Case in point: The listing of Fever-Tree, a producer of drinks. This company sports a turnover of £28 million on an annualised basis but the IPO values the company at £154 million. This may or may not be the right valuation for this company (the backers had even hoped for £200 million!) but it is beyond me why respectable publications abstain from giving an opinion on the merits of this valuation. If anything, that is the most important piece of information that readers would deserve to find. More than 5 times revenues needs more justification than a homely write-up about how the founders started the business.

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Sauve qui peut! Your Pension is not safe!

Any trust you may put into the state providing you with a secure retirement income must be shattered by the news that another country, this time Poland, a honourable (?) member of the European 'Community' has conducted a defacto nationalisation of private pensions. No comment needed. So who is next? The Indian peasants must be on to something when they buy their gold.

Target-date funds no panacea for retirement saving

Are they just a marketing gimmick? (Reuters)

Do not put to much trust into Pension Plans

News that another EU member state has expropriated some pension fund assets in order to pay for irresponsible state expenditures should be a warning sign for savers. We suggest that tax-enhanced saving in pension plans is only undertaken after careful consideration. Legislation can be changed at the stroke of a pen, is not subject to proper democratic supervision and leaves the saver open to arbitrary decisions by politicians.

Ireland raids pension savings again

Who in his right mind would want to entrust his retirement savings to governments? The Irish government wants to use the money to fund a job creation scheme - given the track record of such schemes the money is a much as gone in our opinion.

How safe are state pensions?

Ireland and Argentina are two examples of a new trend where governments that have run out of ideas how to finance their uncontrolled spending will treat money that is supposed to pay for citizens that retire. They blatantly steal from present and future pensioners that rely on a secure retirement after having believed the promises of politicians for most of their lives. Locking up investments in saving schemes that are ultimately controlled by greedy and unaccountable politicians may not be a good idea despite the carrot of tax incentives dangled by governments and providers of pension schemes.

High fees hamper traget-date funds

The importance of keeping a close watch on fees that are paid for investment advice is illustrated by the latest controversy about the idea of so-called 'target date' funds. These funds invest in a mix of stocks and bonds that grows steadily more conservative as investors' retirement—or "target"—date approaches. But while this structure is supposed to help investors saving for their retirement it creates additional pitfalls on the already stony road to build a retirement pot that is sufficiently large to cover the needs of a rapidly-aging population.

Ireland, Hungary expropriate pension funds

The idea of putting one's savings into officially-sanctioned pension funds receives another serious setback when EU member states (or better their ineffective politicians) think that the only way they can save themselves from further fiscal and economic disasters of their making is the expropriation of pension funds that to all intents and purposes have been created to provide their beneficiaries with benefits during their years of retirement. Where are the regulators that are so busy sticking their noses into every aspect of our daily lives? Where is justice and democracy?

And you think you can rely on your pension?

Pension cuts ruled out after backlash

for now your pension may be safe, but for how much longer?

Another Government grabs private pension savings

The Hungarian government takes a leaf out of Argentina's books and has announced that it intends to confiscate part of the private pension savings of its citizens. We have cautioned for a long time to consider all options carefully before relinquishing control over one's savings. The laws in most jurisdictions make it very difficult - often impossible - to withdraw funds from pension plans before a certain age. Even after retirement access is carefully prescribed. If the increasingly desperate governments in most countries can no longer be trusted any commitment of funds to pension plans should be carefully evaluated.

Life-Cycle Funds - no Autopilot to Success

These funds allocate their assets to a mix of underlying funds based on some parameters like the age or risk tolerance of an investor.
In recent years they have become increasingly popular with pension fund investors that are enrolled in defined contribution pension schemes and want to avoid having to make their own investment decisions on a regular basis.
Lifecycle funds - or their underlying investment rationale - can be of interest to the substantial independent investor as well as any financial plan should always take the age of the investor into account.
PBA helps you to look behind the label of the product. Not all lifecycle funds are the same as their allocation to various asset classes can vary substantially from provider to provider. The allocation may at times be totally unsuitable to the needs of the investor.